China, U.S. to talk on currency
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Wen gestures after ringing the opening bell at the New York Stock Exchange.
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(CNN) -- China and the United States have agreed to hold talks on the vexed question of China's currency value next month following Tuesday's meeting between Premier Wen Jiabao and U.S. President George W. Bush in Washington.
U.S. officials said Wen reiterated that it is China's goal to eventually float its currency in international markets, but offered no timetable for doing so.
China has repeatedly said that it is too early to float the yuan, which is fixed at about 8.28 to the dollar. It says its banking system is still too fragile to cope with the destabilizing impact of a float.
The Bush administration says Beijing keeps its currency undervalued against the dollar, making Chinese goods more affordable in U.S. markets and exacerbating a growing trade deficit.
The White House acknowledged the "complex process" of shifting China to a free-floating currency would take some time.
January's meeting between officials will be one of the first steps in that process.
Wen later told reporters Tuesday's discussion with Bush took place in a "friendly, candid, cooperative and constructive" atmosphere, according to China's state-run Xinhua news agency.
Wen said he came to the White House with a new proposal aimed at easing trade tensions.
Wen offered no specifics, but one U.S. official familiar with the discussions said the proposal was to "bump up" major trade talks to involve higher-level officials, such as U.S. Commerce Secretary Don Evans and U.S. Trade Representative Robert Zoellick.
In an address Tuesday night to the U.S.-China Business Council in Washington, Wen said China's economy would quadruple its 2000 size to exceed $4 trillion by 2020.
He said this would open up a "vast vista" for U.S. companies and investors looking at the China market. He noted that the United States was already the biggest overseas investor in China and its third-largest trade partner.
Wen said opening up a country's economy was so much better than closing it. But he said market opening was a two-way street. While China opened its market "ever wider", he hoped the United States would do the same, including in sectors such as high-tech industries.
In a nod to the friction between the two countries over trade issues, Wen urged both sides to "keep cool and be sensible".
"We are friends, not adversaries," he said.
It was theme heard earlier in New York Monday, when he said the purpose of his visit to the United States was to seek friendship, and not to fight a trade war with the world's biggest economy.
"We should not and will not fight a trade war," he said. His comments came against the backdrop of the massive trade surplus that China, the world's No. 6 economy, runs with the United States.
That surplus, which could reach $120 billion this year -- up from $102 billion in 2002 -- is a source of friction in the relationship between the two global giants.
The United States recently put curbs on some exports of Chinese textiles and television sets. In return, China threatened to impose duties on some U.S. goods.
On the currency front, Beijing's view is that a move to greater yuan flexibility is desirable, but it will not happen soon. That is a view echoed by analysts.
While China "would sound conciliatory" about the yuan, it was not able to act in the short term because a revaluation would be too destabilizing for its economy, Hong Kong-based Asia chief economist for Morgan Stanley, Andy Xie, told CNN Tuesday.
In October, Chinese President Hu Jintao told the 21 members of the Asia Pacific Economic Cooperation grouping in Bangkok the issue needed more study.
Not the solution
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The United States capped some Chinese textile imports last month.
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In his New York speech on Monday, Wen said reducing Chinese exports was not the solution to the U.S. trade deficit with China.
"A more realistic solution is for the United States to expand its exports to China," Wen said, according to the text released by the Chinese Embassy.
Putting curbs on China's exports to the United States would "seriously harm" the interests of millions of American consumers and U.S. firms operating in China, Wen said, making products more expensive.
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| GLOBAL TRADERS |
Two-way merchandise trade 2002
1. United States $1806 billion
2. Germany $1105.5 billion
3. Japan $752.4 billion
4. France $655.9 billion
5. China $620.8 billion
Source: WTO
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Morgan Stanley's Xie said the trade relationship between the two was taking on political hues in the leadup to U.S. elections next year, and in reality total U.S. imports from East Asia were actually declining.
What was happening was a "redistribution of exports", meaning goods previously sent from Japan and Taiwan to the United States were now increasingly being exported by China instead, Xie said.
In the longer-term, China needs to expand the market share for U.S. companies in China, for example in the automotive market, Xie added.
-- CNN Senior White House Correspondent John King contributed to this report
