WASHINGTON (AP) _ The Bush administration, struggling to show progress in attacking this country's soaring trade deficits, won a commitment Friday from China that it would move ``firmly and steadily'' to a flexible, market-based currency. However, the Chinese offered no firm timetable for how long the transition will take.
Changing China's currency system has been a key demand of the beleaguered manufacturing sector in the United States. Companies believe China's current policy of linking its currency at a fixed rate to the U.S. dollar has undervalued the Chinese yuan by as much as 40 percent, giving the country a tremendous competitive advantage over U.S. products.
China's commitment came in a joint economic statement issued early Friday following high-level meetings between Treasury Secretary John Snow and Federal Reserve Chairman Alan Greenspan and their counterparts from China, Finance Minister Jin Renqing and Zhou Xiachuan, head of China's central bank.
``The Chinese side reaffirmed China's commitment to further advance reform and to push ahead firmly and steadily to a market-based flexible exchange rate,'' the two sides said in the joint statement.
The statement said the U.S. side expressed support for continued efforts by China's government to ``to bring about this goal as rapidly as possible.''
The Bush administration has been pushing China for more than a year to allow the value of its currency to be set by financial markets. However, the Chinese insist this cannot be done until the country puts in place a number of economic reforms designed to bolster China's weak banking system and protect it from the volatility that would occur with a floating currency.
The U.S.-China discussions came in advance of China's first-ever meeting with the Group of Seven major industrial countries, which was to occur over dinner Friday night. The G-7 has been calling for China to adopt a more flexible currency system.
The G-7 group _ the United States, Japan, Germany, France, Britain, Italy and Canada _ faced a number of global financial issues ranging from surging world oil prices to searching for ways to provide more generous debt relief to the world's poorest countries and helping Iraq rebuild its wartorn economy.
British Chancellor of the Exchequer Gordon Brown said Friday it was essential for the Organization of Petroleum Exporting Countries to take the necessary steps to return oil prices ``to levels consistent with global prosperity.''
The G-7 talks were setting the stage for weekend meetings of the 184-nation IMF and its sister-lending institution, the World Bank.
All the talks were being held under heavy security following the announcement in August that both the IMF and World Bank were potential terrorism targets. More than two dozen blocks of downtown streets were to be closed to traffic as police prepared for anti-globilization and anti-war protests over the weekend.
The Friday dinner marked the first time China has ever attended a G-7 meeting and could signal the beginning of a process in which the world's most populous country is eventually admitted to the group or at least the expanded Group of Eight, which also includes Russia.
While the Bush administration hailed China's new commitment on changing its currency system, critics contend that the administration's strategy of diplomatic engagement with China is taking too long.
A group of eight senators and 22 House members said on Thursday that China should be forced to immediately stop manipulating its currency to gain trade advantages. They called on the administration to bring a case against China before the World Trade Organization, which could lead to trade sanctions against Chinese goods.
Sen. Charles Schumer, D-N.Y., said the administration's diplomatic efforts have been a failure and tougher action is required.
``It is time to bring out the big stick and enforce U.S. trade laws,'' he said while Rep. Sander Levin, D-Mich., complained that China's current system was ``literally shutting down family businesses that have been employing people for generations.''
The lawmakers pointed to a U.S. trade deficit with China which hit $124 billion last year, the highest ever recorded with any country, and which is running at an even higher annual rate _ above $140 billion _ this year.
The issue has also arisen in the presidential campaign. Democratic candidate John Kerry charges that the administration has failed to do enough to attack China and other sources of unfair foreign competition at a time when the country has seen the loss of nearly 2 million manufacturing jobs.
In the joint statement issued after the 16th annual meeting of the U.S.-China Joint Economic Committee, the two countries said the economic rebound in the United States and continued strong growth in China had helped to push the global economy to the fastest growth-rate in two decades.
China pledged to continue its efforts to remove government controls from its financial system, a step that is seen as necessary to eventually allow the value of China's currency to be set on open markets. However, some private economists believe Beijing will not allow its currency to be fully flexible for a period of five years or more.
In a speech Thursday, Snow called for significantly expanded debt relief for poor nations but the plan being advanced by the United States contains no provisions for greater rich country contributions to pay for the debt relief.