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China's yuan rises as talks begin China to learn from US mistakes
(about 18 hours later)
China's yuan is at its strongest level against the dollar since the country scrapped its peg to the US currency in July 2005. Chinese financial officials have said they are keen to learn from the mistakes made by the US that resulted in the sub-prime mortgage crisis.
The yuan rose to a high of 6.8918 per dollar - a gain of 20% since it ditched the fixed exchange rate. But as two days of talks began, US envoy to China Alan Holmer warned that Beijing should not use US woes to block access to its financial markets.
The rise comes as US Treasury Secretary Henry Paulson prepares to meet with Chinese officials. China's currency policy has dominated previous meetings. More emphasis was placed on trading and energy than on China's currency policy as a rising yuan helps ease tensions.
Analysts say China is letting its currency appreciate to cool inflation. The yuan has risen in value by 20% over the past three years.
Many Asian countries are allowing their currencies to strengthen to counter the soaring cost of fuel and food. At a high of 6.8918 per dollar, it is at its strongest level against the dollar since it scrapped its peg to the US currency in July 2005.
Exchange rate reform Mr Holmer described this movement as a "positive development".
Trade and energy are expected to be the main talking points as high-level delegations from the US and China convene for two days of discussions in Maryland. "It is significant and welcome and we hope that it will continue," he added.
Mr Paulson instigated the regular talks, known as the Strategic Economic Dialogue, to tackle trade and currency issues when he joined the Bush administration in 2006. Currency dispute
The US has long urged China to move more quickly on yuan appreciation and Mr Paulson has said that exchange rate reform is critical to China's social stability. The Chinese currency has long been a bone of contention among US manufacturers, who claim the currency is too cheap and gives Chinese exporters an unfair advantage.
The US also believes that Beijing uses regulations to favour domestic companies over foreign rivals and that Beijing does too little to address the theft of copyrights and patents held by Western companies Treasury Secretary Henry Paulson instigated the regular talks between the US and China, known as the Strategic Economic Dialogue, to tackle trade and currency frictions when he joined the Bush administration in 2006.
The hope was that it would lead to broad changes in Chinese economic policy that would help to address the US trade deficit with China, which last year hit a record $256.2bn.
Mr Paulson has said that exchange rate reform is critical to China's social stability.
However, with the US economy still reeling from the sub-prime mortgage meltdown and resulting credit crunch, it is easier for China to reject such criticism.However, with the US economy still reeling from the sub-prime mortgage meltdown and resulting credit crunch, it is easier for China to reject such criticism.
Chinese officials have promoted their own more assertive style of economic management and regulation and chided the US for allowing the dollar to slide.Chinese officials have promoted their own more assertive style of economic management and regulation and chided the US for allowing the dollar to slide.
Mr Paulson said that the dialogue was important even when it only produced incremental changes.
"The United States and China don't always agree. Sometimes we may disagree quite strongly, but we keep talking," he said.
Business dealsBusiness deals
China's commerce minister Chen Deming, who is taking part in the talks, said US and Chinese companies have signed business deals worth more than $8bn. China's commerce minister Chen Deming, who is taking part in the talks, said US and Chinese companies have signed business deals worth more than $13.6bn.
The agreements cover 35 deals in sectors ranging from the car industry to telecommunications.The agreements cover 35 deals in sectors ranging from the car industry to telecommunications.
In one deal, US car giant General Motors said it had signed a pact worth a $1bn.In one deal, US car giant General Motors said it had signed a pact worth a $1bn.
It is not clear whether the next US administration will continue the talks.It is not clear whether the next US administration will continue the talks.