The Yuan is costing American jobs, Washington says

The latest meeting of the 21-country Asia Pacific Economic Co-operation (Apec) group, was expected to be dominated by the value of China's currency, the yuan, which has been pegged at 8.30 to the dollar for a decade.

Chinese ministers, however, stayed well away from the limelight, offering only to loosen controls on companies' rights to own foreign currencies.

Too fast a move away from the peg, they hinted, would spell disaster for an economy already breeding uncomfortably high unemployment.

Reluctance

And the other Apec ministers were little keener on any rapid move to the kind of pure market-based currency system the US wants.

We expect our trading partners to treat our people fairly... and we don't think we're being treated fairly when a currency is controlled by the government President George W Bush

In a statement, the 21 said the priority was regional structural reform, refusing to commit to the "flexible" exchange rate policies sought by the US.

"We emphasized the importance of accelerating structural reform, adopting macroeconomic policies that promote sustainable growth, supported by appropriate exchange rate policies that facilitate orderly and balanced external adjustment," the ministers said in a statement.

"While recognizing that there is no single exchange rate regime that suits all economies at all time, we noted a view expressed at the meeting that more flexible exchange rate management, in some cases, would promote this objective."

'Deal with it'

Those considerations did not play well in Washington, where President George W Bush responded to building pressure about the dismal job situation at home with an outspoken attack on China's currency policy.

In an interview on the business TV channel CNBC, President Bush said his Treasury Secretary, John Snow, would be delivering a "strong message".

"We expect our trading partners to treat our people fairly - our producers and workers and farmers and manufacturers - and we don't think we're being treated fairly when a currency is controlled by the government," he said.

"We believe the currency ought to be controlled by the market."

After Mr Snow returned from meetings in Beijing to discuss China's yuan policy, the two of them would "deal with it accordingly", President Bush said.

Unions and some lawmakers accuse China's weak yuan policy of stealing American jobs by pricing US companies out of the international market, and the issue could play heavily during the run-up to the presidential elections in November next year.

But it is not only China in the firing line, as some diplomats believe Japan's return to selling the yen - trying to reduce its value to support its own exporters - could also incur US ire.