President Barack Obama on Monday pushed President Hu Jintao of China to allow the renminbi to appreciate and to back sanctions on Iran.
After an hour-and-a-half-long meeting on the sidelines of the nuclear security summit Mr Obama is hosting, the two sides emphasised their increasing co-operation after a period when Washington and Beijing appeared to be at loggerheads.
The meeting had been in doubt after disputes this year over Taiwan and the Dalai Lama.
“The fact that Hu Jintao decided to come is in itself quite a success for the administration,” said Michael Green at the Center for Strategic and International Studies in Washington.
US officials say China has also become more responsive on two highly charged political issues for Mr Obama – Iran and the alleged undervaluation of the renminbi, which many US officials say leaves US producers unable to compete.
Having decided to begin discussions on United Nations sanctions against Iran, China has signalled it may be preparing for a currency appreciation.
“The president reaffirmed his view that it is important for a sustained and balanced global economic recovery that China move toward a more market-oriented exchange rate,” said Jeff Bader, Mr Obama’s top White House adviser on Asia. He added that Mr Obama also “noted his concern” over market access barriers in China.
“The two presidents agreed that the two delegations should work on a [UN] sanctions resolution in New York, and that’s what we’re doing,” said Mr Bader.
Monday’s summit also saw a declaration by Ukraine that it would rid itself of all highly enriched uranium on its territory by 2012. The summit, which continues on Tuesday, is intended to put all such dangerous nuclear materials out of the reach of terrorists by 2013.
China was provided with fresh evidence in the debate over the renminbi’s valuation by Monday’s data on foreign exchange reserves, which rose by $47.9bn to $2,447bn by the end of the first quarter, compared with a $126.5bn rise in the fourth quarter of 2009, the Chinese central bank said on Monday.
Analysts said the moderation in the reserves growth was mostly due to a 77 per cent drop in China’s trade surplus in the first quarter from the same period a year earlier to $14.5bn.
China recorded a trade deficit of $7.2bn in March, its first in six years, which the country’s Ministry of Commerce said proved the exchange rate was not the main factor determining trade flows.
“This will certainly help Beijing’s argument but, regardless of the monthly deficit and slowing reserves, the US will keep up the pressure because a lot of the debate is motivated by political considerations on Capitol Hill,” said Dong Tao, chief China economist at Credit Suisse.
Beijing appears to be preparing for an imminent adjustment to its exchange rate mechanism. Senior officials and economists suggest it may widen the daily trading band and resume the gradual managed appreciation in the renminbi that was halted in July 2008 in response to the global financial crisis.
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