Tuesday, April 18, 2006

Hu's White House lunch: Rare but not bloody

WASHINGTON - Chinese President Hu Jintao was to touch down in the United States on Tuesday, and most pundits seem to believe that his visit - which includes his first trip to the White House - will yield little in the way of tangible results. No one is expecting any deals to be made on contentious economic disputes. No one anticipates Hu promising to cut his country's military spending and energy consumption or announcing a new crackdown on rampant intellectual property theft. In fact, US President George W Bush will not even honor him with a formal state dinner. (The two presidents will have a very formal lunch instead.)

That issue in itself is a two-headed monster: trade and exchange rates. Many American leaders, eager to protect manufacturing jobs, believe China is flooding the US with cheap imports. This problem, many say, is exacerbated by China's undervalued currency and trade surplus: if the yuan is cheap, the logic goes, Americans buy more Chinese products, sending their dollars to Beijing , where they are kept in reserves, further widening the trade gap between the two countries. According to some news reports, China may have recently set a new record for foreign-currency reserves by holding as much as US$854 billion.


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