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Obama In China Faces Currency Strains, Great Climb


U.S. President Barack Obama (left) and Chinese President Hu Jintao chat during a state dinner at the Great Hall of the People on November 17.

U.S. President Barack Obama (left) and Chinese President Hu Jintao chat during a state dinner at the Great Hall of the People on November 17.

BEIJING (Reuters) -- U.S. President Barack Obama was set to continue his effort to court China while cajoling it on economic strains, with the final day of his visit featuring talks with Chinese Premier Wen Jiabao.

Obama's first visit to China has been a mix of goodwill displays toward its sometimes wary people and leaders, and closed-door discussions focused on the two big powers' vast and increasingly complex relationship.

November 18 will be no different. Obama will visit the Great Wall -- for many Chinese people a proud symbol of their imperial heritage -- and he may also press, Wen, the head of the Chinese government, on touchy economic and diplomatic issues.

The U.S. president made plain in a summit with President Hu Jintao on November 17 that one of his topmost concerns is China's currency policy. Many in Washington and other capitals believe Beijing keeps the yuan currency too low in value, disadvantaging competitors and distorting global economic flows.

Hu, who is also the head of China's Communist Party, did not mention the yuan or the dollar in his comments before reporters.

But Premier Wen, who is more deeply involved in day-to-day economic affairs, may be more willing to grapple with Obama on currency and China's own gripes with U.S. trade rules.

Officials and experts from both sides have stressed, however, that Obama's visit will not bring about immediate policy shifts.

Such summits are about setting priorities, said Jin Canrong, an expert on China-U.S. ties at Renmin University in Beijing.

"Any policy changes by China, including on the exchange rate, will be based on its assessment of its own interests, not on external pressure," said Jin.

Obama's talks with Wen may also cover Iran and North Korea, both nuclear trouble-spots where Washington and Beijing say they want to work together, but often disagree on how much pressure to apply. Wen visited North Korea early last month.

The issue of currencies has drawn testy comments in recent days from U.S. and Chinese officials. China's Commerce Ministry on November 16 rebuffed calls for the yuan to appreciate, signaling resistance to change foreign exchange policy.

Outside pressure has been building on Beijing to let the yuan rise after more than a year of it being nearly frozen in place against the dollar, with the latest appeal voiced by the head of the International Monetary Fund on November 17.

But Premier Wen may have his own warning for Obama.

In March, he took Washington to task over its fiscal and financial policies, saying he worried over the health of China's vast U.S. assets.

China has amassed $2.27 trillion of foreign exchange reserves, the world's largest stockpile, and analysts think about two-thirds of this is invested in dollar-denominated assets.
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