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Tuesday, Jan 18, 2011
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U.S. policy fuelling inflation: Hu

Narayan Lakshman

Chinese President's stress on socialist democracy

Washington: Two days before his much-anticipated visit to the United States, Chinese President Hu Jintao said that U.S. monetary policy “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”.

In rare comments made directly to U.S. media, Mr. Hu deflected criticism away from China's currency, which senior U.S. officials have persistently said was overvalued. Instead, he suggested in an interview to The Wall Street Journal and Washington Post, efforts by the U.S. Federal Reserve to stimulate growth through huge bond purchases were fuelling inflation in emerging economies.

However while Mr. Hu acknowledged “some differences and sensitive issues between us” — his tone was described as “generally compromising” — and he avoided specific mention of some of the controversial issues that “have dogged relations with the U.S. over the past year or so”.

These include the U.S.' arms sales to Taiwan, which resulted in a suspension of military-to-military ties between the two countries, imprisoned Nobel Peace Prize winner Liu Xiaobo, China's expanding naval prowess and complaints about cyber-attacks by Google and other internet-related entities in China.

Yet tensions were recently evident during a series of meetings in Beijing between U.S. Defence Secretary Robert Gates and his Chinese counterpart General Liang Guanglie, particularly regarding China's alleged development of a stealth aircraft and the 2009 arms sales to Taiwan.

In the weeks leading to Mr. Hu's visit U.S. Treasury Secretary Timothy Geithner also reiterated the U.S. view that “a stronger yuan is in China's own best interests, because it would help tame rising inflation that has become a key risk to China's rapid growth,” the Journal reported.

Mr. Hu however was said to have dismissed Mr. Geithner's claim arguing that China was combating inflation with an integrated policies including interest-rate hikes, and “inflation can hardly be the main factor in determining the exchange rate policy.”

The Post noted that during Mr. Hu's visit the Obama administration would also seek to refocus attention on China's record on human rights and political freedoms, which re-entered spotlight late last year following the Nobel Committee awarding its 2010 Peace Prize to a Mr. Liu.

Reform

Mr. Hu nevertheless hinted that China would continue to develop “socialist democracy.” Political reform, Mr. Hu said to the Post, must “meet people's growing enthusiasm for participating in political affairs.”

He added that China would “define the institutions, standards and procedures for socialist democracy, expand people's ordinary participation in political affairs at each level and in every field, mobilize and organise the people as extensively as possible.”

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