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international intrigue

China’s President Comes to Washington, Negs the Dollar

Chinese president Hu Jintao is visiting Washington this week in an attempt to ease tensions between China and the U.S. If interviews in advance of his meeting with President Obama on Wednesday are any indication, relations are only likely to improve from adversarial to awkward. In a rare Q&A with international media, Hu avoided mentioning controversial issues like U.S. arm sales to Taiwan that led to a freeze in military relations. But he wasn't above getting some digs in about the poor old American dollar. Hu downplayed the U.S.'s argument that China should appreciate its currency to control inflation, despite accusations that China undervalues the yuan in order to make its products cheaper overseas. However, Republican gains in Congress means there's less pressure to go after China for currency manipulation or impose new tariffs to mitigate the trade gap. Hu also tried to make the case for turning the yuan into a global currency, calling the prevailing system dominated by the dollar a "product of the past." In the past, China has complained that the U.S. Federal Reserve stimulates growth with large bond purchases to curb long-term interest rates, hurting emerging economies like China's, which managed to emerge from the crisis in tact.

The last time Obama and Hu met at the G-20 summit in November, China criticized the Fed's $600 billion bond-buying program. In the Q&A, he reiterated that the global financial crisis reflected "the absence of regulation in financial innovation," calling for an international financial system that is more "fair, just, inclusive and well-managed."

Further complicating the situation: the fact that this attempt at easing tensions is coming from a world leader who doesn't exactly seem to have a tight grip on his own country. China might be the world's fastest-growing superpower, but Hu "may be the weakest leader of the Communist era." For example, take Hu's meeting last week with Defense Secretary Robert Gates, where it was news to him that his air force had just done a test flight for China’s first stealth fighter. Analysts say that China's military and state-run businesses operate autonomously, sometimes to the U.S.'s detriment.

Even if Wednesday's meeting proves successful, China is expected to undergo a leadership change in 2012. And none of the contenders for Hu's replacement want to be seen "as subservient to the United States."

Hu questions future role of US dollar [Financial Times UK]
Hu Highlights Need for U.S.-China Cooperation, Questions Dollar [WSJ]
Dampening the U.S.-China fireworks [Reuters]
China Leader’s Limits Come Into Focus as U.S. Visit Nears [NYT]

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Photo: Ron Sachs-Pool/Getty Images