China will not bow to foreign demand for faster gains in the yuan and will stick to its gradualist approach in currency reform, senior officials said on Friday, indicating Chinese President Hu Jintao may push back if President Barack Obama presses him on the issue next week.
Obama is likely to raise U.S. complaints at a summit with Hu on Jan 19 that Beijing maintains the yuan at artificially weak levels, giving China an unfair trade advantage.
But Cui Tiankai, a vice foreign minister, said: First of all, I want to say that in undertaking reform of the exchange rate formation mechanism for the renminbi ... that is based on China's own developmental interests and needs, and is not in response to demands from another country.
Of course, in doing this, that can benefit both China's own reform and opening up and development, and also trade and economic relations with other countries, including with the United States, he added, speaking at a forum hosted by the Foreign Ministry.
U.S. Treasury Secretary Timothy Geithner said on Wednesday that Washington was willing to make progress in giving China greater access to the American market and high-tech goods, provided that it saw some flexibility from Beijing on its tightly controlled exchange rate regime.
Chinese government officials and economists said Beijing will cast a skeptical eye over the offer and will refuse to be drawn into a bargain to speed up yuan appreciation.
Li Dongrong, an assistant governor at the People's Bank of China, told a forum on Friday that China would continue its gradual reform of the currency, keeping a close eye on its impact on the real economy and in the trade sector.
YUAN SET FOR GRADUAL RISE
The yuan has risen nearly 3.5 percent against the dollar since Beijing ended its peg to the dollar in June. From the time of its landmark revaluation in 2005, the Chinese currency has risen about 25 percent.
The central bank has guided the yuan to record highs before Hu's visit. A Chinese central bank adviser said last week that it was expected to rise between 5 and 6 percent this year.
China, the largest creditor to the United States, has voiced concern about aggressive U.S. government spending and ultra-loose monetary policy that it says could sap the dollar and hit its U.S. investments.
Cui said he agreed with a comment he cited as coming from Geithner: Both sides have a great deal invested in each other's success.
Hu and Obama will discuss a wide range of issues from the global economy to human rights when they meet at the White House next week.
China's development will not threaten or harm the United States' interests, and will instead bring more opportunities of all kinds for the United States and its people, Cui said.
Likewise, a United States that stays prosperous and strengthens cooperation is beneficial for China's development.
(Reporting by Chris Buckley, Writing by Sui-Lee Wee and Ben Blanchard; Editing by Ken Wills & Kim Coghill)