The United States welcomes the rise in the yuan's exchange rate in recent years but wants the currency to climb further, visiting Commerce Secretary Gary Locke said on Tuesday.
However, a Chinese trade official said that despite pressure for the yuan to appreciate, the currency would probably not see a major adjustment until the country's exports improve noticeably.
We think more progress needs to be made in that area, Locke told a news conference in Guangzhou, the capital of southern Guangdong province, which accounts for nearly a third of China's exports.
China has in effect re-pegged the yuan to the dollar since mid-2008 to help its exporters, who were hit hard by a slump in orders as the global financial crisis intensified.
Beijing revalued the yuan by 2.1 percent against the dollar in July 2005 and, over the following three years, gradually let it climb by another 19 percent before calling a halt to its rise.
We're pleased with the movement so far, but of course more needs to be done, Locke said.
Speaking at a separate forum in Beijing, Jiang Jianjun, a deputy director with the Ministry of Commerce's Department of Foreign Trade, cited China's rising share of global output and its swelling foreign exchange reserves as pressures on the yuan to strengthen.
However, according to our projections, until there's a noticeable improvement in exports, the exchange rate will not see a major adjustment, Jiang said.
He said it would take two or three years for China's combined exports and imports to regain pre-crisis levels.
COOPERATION ON ENERGY
The U.S. commerce chief will participate on Wednesday and Thursday in trade talks in Hangzhou, along with U.S. Trade Representative Ron Kirk and Chinese Vice-Premier Wang Qishan.
Locke said he expected the meetings to pave the way for significant improvements and progress in the trade relationship between the two countries when President Barack Obama visits China next month for talks with President Hu Jintao.
Locke did not delve into detail but said that energy co-operation would be a big topic between the two presidents, with U.S. firms seeking easier access to the potentially lucrative China market for clean energy, alternative fuels and energy-efficient products.
The yuan's exchange rate has dropped down the U.S. diplomatic agenda in the past year as Washington has looked to China for help in hauling the world economy out of recession.
The Obama administration said on October 15 that it continued to believe the yuan is undervalued but declined to declare that China was manipulating its currency.
But the Treasury Department, in a semi-annual report to Congress on currency practices of key trade partners, said China was piling up foreign exchange reserves at a rate that threatens progress in reducing global economic imbalances.
It warned that lack of flexibility in the exchange rate for the yuan might be damaging as stimulus is withdrawn and overseas demand for Chinese-made goods returns.
Currency traders in the non-deliverable forwards market were anticipating on Tuesday that the yuan would be worth 2.4 percent more against the dollar in a year's time.
Locke said a recent spat over Washington's decision to slap tariffs on imports of cheap Chinese tires would be discussed in Hangzhou, but he played down the issue.
Some of the cases that have been in the news lately represent a very small, small fraction of all Chinese exports into the United States, he said.
Locke sounded a measured call for China to strengthen enforcement of intellectual property, which he said was essential for China as it upgrades its industrial base and puts greater emphasis on research and development and innovation.
American companies in fields as diverse as technology, entertainment and pharmaceuticals still lose billions every year in China from intellectual property theft, he said.
Locke suggested that China impose stiffer penalties, streamline the work of government agencies and bolster its patent system.
In short, much more needs to be done, he said.
In a conspicuous recent case, pirated versions of Microsoft's
We are concerned because I think it really kills the economy, Simon Leung, the chairman of Microsoft in Greater China, told Reuters in Guangzhou.
The Business Software Alliance, an oversight body created by the software industry, says the sector lost more than $6.6 billion in China last year to piracy.
(Editing by Alan Wheatley and Jason Subler)