An employee counts yuan banknotes at a bank in Suining, Sichuan province, as China's central bank, the People's Bank of China, said it would increase the benchmark lending rate by 25 basis points to 5.81 percent and raise the benchmark deposit rate also by 25 basis points to 2.75 percent. (Reuters)BEIJING: China's central bank pledged Thursday to increase the flexibility of its yuan exchange rate, ahead of President Hu Jintao's visit to the US where the currency issue will be raised. We will “enhance the flexibility of the exchange rate, and maintain the basic stability of the RMB (yuan) exchange rate at a reasonable and balanced level,” the bank said in a statement. Hu is due in Washington on Jan. 19. He will meet with US President Barack Obama, who is expected to raise the sensitive issues of trade and currency reform with him during their talks. Washington wants Beijing to allow the yuan to appreciate more quickly. Critics say China keeps it artificially undervalued to gain an unfair trade advantage that has cost thousands of US jobs. China pledged in June to allow the yuan to trade more “flexibly” but it has appreciated about three percent since that time. “China plays an enormously important role in our global economy, and China has to take steps to rebalance its currency,” White House spokesman Robert Gibbs told reporters on Wednesday. “And the president will continue to make that point when President Hu is here,” Gibbs said. China's foreign ministry also defended the yuan exchange rate Thursday, saying it was not the main cause of the Sino-US trade imbalance. Ministry spokesman Hong Lei instead named the “international division of labor” and US export restrictions on high-tech products as contributing factors to China's trade surplus with the US. Hong told reporters that China would continue to advance reform of its exchange rate mechanism - remarks echoed by the central bank in its statement. He added Beijing had taken measures to increase imports from the United States and promote balanced trade. “That proves that the renminbi exchange rate is not the main cause of the China-US trade imbalance,” he said. In Madrid, meanwhile, Chinese Vice Premier Li Keqiang has said Beijing is willing to buy about €6.0 billion worth of Spanish public debt, Spanish newspaper El Pais reported Thursday, citing government sources. Li told Spanish Prime Minister Jose Luis Rodriguez Zapatero during a meeting in Madrid Wednesday that China “was willing to buy as much Spanish debt as its Greek and Portuguese debt holdings combined.” – Agence France
