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Beijing (AFP) Jan 6, 2011 China's central bank pledged on Thursday to increase the flexibility of its yuan exchange rate, ahead of President Hu Jintao's visit to the United States where the currency issue will be raised. We will "enhance the flexibility of the exchange rate, and maintain the basic stability of the RMB (yuan) exchange rate at a reasonable and balanced level," the People's Bank of China said in a statement. Hu is due in Washington on January 19. He will meet with US President Barack Obama, who is expected to raise the sensitive issues of trade and currency reform with him during their talks. Washington wants Beijing to allow the yuan to appreciate more quickly. Critics say China keeps it artificially undervalued to gain an unfair trade advantage that has cost thousands of US jobs. China pledged in June to allow the yuan to trade more "flexibly" but it has appreciated about three percent since that time. "China plays an enormously important role in our global economy, and China has to take steps to rebalance its currency," White House spokesman Robert Gibbs told reporters on Wednesday. "And the president will continue to make that point when President Hu is here," Gibbs said. China's foreign ministry also defended the yuan exchange rate on Thursday, saying it was not the main cause of the Sino-US trade imbalance. Ministry spokesman Hong Lei instead named the "international division of labour" and US export restrictions on high-tech products as contributing factors to China's trade surplus with the United States. Hong told reporters that China would continue to advance reform of its exchange rate mechanism -- remarks echoed by the central bank in its statement. He added Beijing had taken measures to increase imports from the United States and promote balanced trade. "That proves that the renminbi exchange rate is not the main cause of the China-US trade imbalance," he said. Before Hu heads to Washington, US Defence Secretary Robert Gates will visit China from Sunday -- one year after Beijing cut military ties with Washington in protest against US arms sales to rival Taiwan. The two nations have since resumed low-level military contacts at a technical level and Gates will visit at the invitation of his Chinese counterpart, Liang Guanglie. "China... expects the visit to further increase mutual understanding and trust between the two militaries, enhance our military cooperation level and promote sound and stable military-to-military relations," Hong said.
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