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China defended its currency regime on Tuesday ahead of a visit to the United States by President Hu Jintao, but hinted at possible future changes by saying it would "develop and perfect" the exchange rate.

Some U.S. politicians and industry groups complain that the yuan's small revaluation last month will do little to address the yawning U.S. trade deficit, and hope President Bush will press Hu on the matter when they meet next week.

In a briefing about Hu's trip, He Yafei, director-general of the Foreign Ministry's department of North American and Oceanian affairs, said the reforms to the yuan, also known as the renminbi, fit China's reality.

"We will further develop and perfect the renminbi exchange system with a firm heart," He said.

He said that currency issues were a matter of national sovereignty and that Beijing had always taken a responsible attitude toward the exchange rate.

"We have taken into consideration the practical situation of China's economic development and how to maintain the financial and economic stability of the region and the world," He said.

Critics accuse Beijing of keeping the yuan undervalued so as to make its exports cheaper on the world market.

On July 21, the central bank revalued the yuan by 2.1 percent and dropped the dollar peg in favor of managing the exchange rate with reference to a basket of currencies.

Hu visits the United States from September 5 for talks also expected to feature concerns over Taiwan and the trade deficit.

Posted by edelfenbein at August 30, 2005 9:37 AM