US, China begin trade talks

But even as Snow prods Chinese leaders about their currency, administration officials are at least equally preoccupied with gaining more access to China for American financial institutions.

Snow8217;s trip coincides with a huge conference in Beijing staged by the biggest investment banks on Wall Street, where top officials for the People8217;s Bank of China will mingle with bankers promoting credit-derivative swaps and offering tutorials on mergers and acquisitions.

The result is what one Senate lawmaker called a 8220;complex minuet8221; between American and Chinese officials. Under heavy pressure from the US, China took a first step in July toward flexible exchange rates by letting the yuan rise 2 per cent against the dollar. The Bush administration welcomed the move as a breakthrough, the beginning of the end to China8217;s fixed exchange rate between the yuan and the dollar. Critics complained for years the yuan was badly undervalued, making Chinese exports artificially cheap while widening a huge trade surplus with the US.

That surplus is approaching 200 billion this year. The Chinese government has amassed 740 billion of dollar-denominated reserves, most of that in the last three years, to keep the yuan from rising in value.

But since its first tentative move, which was too small to have any significance, China has not allowed any additional adjustments to the yuan. Now, lawmakers in both political parties are pressuring Snow to produce more results.

8220;If you see the Chinese again, tell them I don8217;t think they are acting in the spirit of their move,8221; Senator Charles E. Grassley, Republican of Iowa and chairman of the Senate Finance Committee, told Snow at a hearing last Thursday.

Senator Charles E. Schumer, Democrat of New York, warned on Friday he would reintroduce legislation as early as Thanksgiving that would threaten China with tariffs of 27.5 per cent on all its exports to the US.

Snow is in a tight spot. In April, he came close to accusing China of manipulating the yuan, a move that would require direct consultations with China and could lead to new trade restrictions. The Treasury will issue a follow-up report in early November, and Snow warned in April he would accuse China of currency manipulation if it failed to make substantial changes. China8217;s cost advantages over the US would remain even if the yuan climbed 20 per cent against the dollar. 8220;Secretary Snow and Chairman Greenspan both know that if there is no further movement by Thanksgiving, our legislation will pass,8221; Schumer said.

8212;Reuters

China allows IFC, ADB to issue yuan-denominated bonds

Beijing: China8217;s central bank approved International Finance Corporation IFC and Asian Development Bank ADB to issue the first batch of yuan-denominated bonds on the Chinese mainland to further develop China8217;s financial market. IFB and ADB have been allowed to issue their initial batch of yuan-dominated bonds of 140 million and 124 million, respectively. The move will help promote the internationalisation of China8217;s bonds market, as the two groups are experienced in helping burgeoning market-oriented countries open their capital market, a banker said. By expanding the proportion of direct financing, it will improve the unbalanced financial structure, he added. This move also blesses domestic companies with fewer risks when getting loans. Yuan-denominated bonds are less affected by the frequently-changing forex rate in the global financial market, the official said. IFC and ADB will also benefit from this move as they can enjoy new and more diversified sources of capital, he said. PTI