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Chinese president bats away yuan criticism

By Aaron Smith, staff writer


NEW YORK (CNNMoney) -- Chinese President Hu Jintao, on the eve of his U.S. visit, has called the dollar-dominated international currency system a "product of the past" and said the yuan will emerge as a global currency.

In written responses to questions from the Wall Street Journal and Washington Post published Monday, Hu also said he wants to strengthen ties with the United States.

"We both stand to gain from a sound China-U.S. relationship, and lose from confrontation," said Hu, in written responses to questions from the two newspapers.

Hu is scheduled to visit the White House on Wednesday to discuss international trade, currency and other issues. The upcoming meeting has put the spotlight on criticism that the government-controlled People's Bank of China artificially undervalues the yuan, bringing down the cost of Chinese exports and giving it an advantage in the international market.

But Hu dismissed the criticism.

"The current international currency system is the product of the past," Hu said, in his response to the publications.

On Jan. 12, Treasury Secretary Timothy Geithner said China must do more to address its undervalued currency and dependence on exports, adding that such a move is in Beijing's best interest because it will control inflation.

But Hu dismissed the argument that price stability is a reason for yuan appreciation, telling the publications that Chinese inflation is "moderate and controllable."

The Chinese president has complaints of his own, particularly with Federal Reserve policy aimed at stimulating the economy. The policies particularly affect China, given that it holds billions of dollars in government debt.

Hu told the publications 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."

Hu also renewed a promise to make sure that U.S. companies in China are treated fairly.

"All foreign companies registered in China are Chinese enterprises," he said, according to reports. "Their innovation, production and business operations in China enjoy the same treatment as Chinese enterprises."

In an apparent attempt to smooth relations ahead of the meeting, the Bank of China on Jan. 12 began providing the yuan directly to U.S. traders for the first time. To top of page

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