Hu calls US currency “product of past”, stresses cooperation
Prior to his state visit to Washington D.C. this week, Chinese President Hu Jintao stressed the need for cooperation between the US and China on several fronts.
However, his assessment that the present US dollar-dominated currency system is outdated, “a product of the past” and goal to make the Chinese yuan the global currency of choice is ruffling some feathers.
In a written response to questions from the Washington Post and Wall Street Journal, President Hu said “We both stand to gain from a sound China-U.S. relationship, and lose from confrontation”.
While he is downplaying some issues that have been a source of friction, Hu made a veiled criticism of efforts by the U.S. Federal Reserve to promote growth through large bond purchases which suppress long-term interest rates. This plan is one that China asserts is causing inflation in its economy, as well as other emerging economies.
Speaking of this U.S. monetary policy Hu said it “has a major impact on global liquidity and capital flows and therefore, the liquidity of the U.S. dollar should be kept at a reasonable and stable level.”
On the flip side, the US view that China keeps its currency artificially low will be on the list of topics of discussion. The US claims that China’s valuation of the yuan harms competitiveness not only for US companies, but also for poorer countries.