China tells US 'get house in order' over currency, food safety

Chinese Vice-Commerce Minister Chen Deming speaks during a news conference at The Third Strategic Economic Dialogue in Xianghe. Photo / Reuters

XIANGHE - An assertive China fended off US pressure over currency policy and food safety on Wednesday and told Washington to put its own house in order rather than blame Beijing for its economic problems.

The jousting, during a high-level "strategic economic dialogue" near Beijing, underscored the growing complexity of a relationship that US Treasury Secretary Henry Paulson said was now central to maintaining global economic prosperity.

Paulson, who called the first of two days of talks "lively but friendly", urged China to let its currency rise faster to curb inflation, now at an 11-year high of 6.9 per cent.

"China's leaders have voiced concerns about China's macroeconomic stability, in particular mounting inflation, growing asset bubbles and possible overheating. A more flexible exchange rate policy is especially important to China now, given these risks," Paulson said.

China's central bank let the yuan rise as high as 7.3647 per dollar on Wednesday, the strongest level since the currency was unpegged from the dollar in July 2005.

The yuan has gained 12.4 per cent against the dollar in total since then.

Vice-Commerce Minister Chen Deming dug in his heels against a faster rise, saying China's economy could not afford it.

Turning the tables on the United States, Chen criticised the recent decline in the dollar, which he said was pushing up oil and other resource prices and eroding the value of US assets held by countries such as China.

"What I'm worrying about now is the weakening dollar and its potential impact on global growth," Chen said.

Central bank chief Zhou Xiaochuan also spoke out for a strong dollar and said he was concerned that loose US monetary policy could flood the global economy with cash and buffet China's markets in the process.

The news appearances by Chen, Zhou and others appeared to be an attempt by Beijing to win the battle of public opinion. High-ranking Chinese officials usually keep a lower profile at such conferences.

Vice-Premier Wu Yi , known as China's "Iron Lady", also came out swinging. With several bills wending their way through the US, Congress aimed at getting Beijing to speed up the yuan's rise, she warned Paulson that business ties would be severely undermined if the measures became law.

"Obviously, to resort to trade protectionism and blame another country for the structural problems in the US economy is the wrong approach which would only harm the interest of the US itself," Wu said.