Hu defended China’s policy of pegging the yuan to the dollar at a Monday meeting with Obama in Washington and said changes to the exchange rate would not come from U.S. pressure.

“Detailed measures for reform should be considered in the context of the world’s economic situation, its development and changes as well as China’s economic conditions. It won’t be advanced by any foreign pressure,” Hu said in remarks released by China’s Foreign Ministry on Tuesday. He said reform would come based on China’s “own economic and social development needs.”

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“The risk of a collision course on China’s currency peg and a wider trade rift between the world’s largest debtor and creditor nations has risen significantly in recent months,” Roubini, a professor at New York University, wrote in a note to clients. “Markets do not seem to be pricing in the potential consequences of the U.S. labeling China a currency manipulator, which could be significant even if both sides avoid taking immediate bilateral actions.”

There is a 50 percent chance that the U.S. government will label China a currency manipulator, said Roubini, who issued his comments after attending a private meeting for Western delegates with Premier Wen Jiabao at the annual China Development Forum.

Labeling China a currency manipulator would make it easier for companies to seek import duties, U.S. Senator Charles Schumer said this week. China will balk at allowing the yuan to appreciate if that happens, Donald Straszheim, director of China research at International Strategy & Investment Group, said yesterday.

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WASHINGTON — Despite mounting pressure in Congress for the Obama administration to declare China a currency manipulator, the Chinese government is giving no indication that it will change its exchange rate policy.

After meeting with officials at the Treasury and Commerce Departments on Wednesday, China’s deputy commerce minister, Zhong Shan, told reporters, “The Chinese government will not succumb to foreign pressures to adjust our exchange rate.”

Mr. Zhong reiterated a statement this month by the Chinese premier, Wen Jiabao, who said he did not believe the currency, the renminbi, was undervalued.

“It is wrong for the United States to jump to the conclusion that China is manipulating currency from the sheer fact that China is enjoying a trade surplus,” Mr. Zhong told reporters in a meeting at the Chinese Embassy. “Besides, it’s wrong for the United States to press for the appreciation of the renminbi and threaten to impose punitive tariffs on Chinese experts. This is unacceptable to China.”

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(Remarks as Prepared)

In the 1970s, China injected itself with economic reform.  Now, in 2010, China appears afflicted by a menacing strain of that reform that is either constraining a global economic recovery or, worse, capable of creating a new economic pandemic.  While China’s emergence as an economic powerhouse has rightly grabbed our attention, however, the trends are not new, and there are some predictable similarities between China’s economy now and Japan’s in the 1980s.  It is critical that China address the serious flaws in its economic structure, but we should remember we’ve seen this before, although perhaps not on this scale.

This hearing is about China’s currency policy and global imbalances.  Like the IMF has, I can stipulate that China’s currency is undervalued, plain and simple.  I can also agree with G20 leaders that the world has steep imbalances that must be corrected.  But let’s not lose sight of the fact that there are fundamental problems with China’s economy, and let’s not pretend that China’s intervention in the currency markets, by itself, is the root cause of our ten percent unemployment or of China’s ten percent annual GDP growth.

We’ll hear today from some pretty bright economists on the problems with China’s economy.  I’m looking forward to hearing what they have to say.  My going-in view is that China’s deliberate and dangerous wealth transfer from everyday households to inefficient export-platform factories is standing in the way of the domestic consumption that the Chinese (and the rest of the world) believe the Chinese (and the rest of the world) so desperately need.  China must introduce global best practices into its banking sector, mature its financial markets, better protect intellectual property rights, and open more comprehensively to foreign direct investment.  China also should open its markets much more fully to all goods and services, particularly those coming from the United States. 

An increase in the value of the RMB will facilitate some of these measures.  For others, the much-sought currency appreciation will be a happy—though perhaps unintended—offshoot of the broader reform.  All of these measures will help China move toward liberalizing its capital account, which should be the ultimate goal for all of us, because none of us can know the true extent of RMB undervaluation until the currency floats.

In my view, however, when it comes to China, focusing on the currency valuation issue to the exclusion of the others is more likely to lead to collective frustration than to any improvement in the health of the critical U.S.-Chinese economic relationship.  But, that said, while we shouldn’t obsess over the value of the RMB, it would be an enormous mistake to give up on addressing it.

To that end, I believe the Obama Administration should continue to address China’s currency policy in high-level bilateral summits, like the Strategic and Economic Dialogue.  I think the Administration should restart languishing Bilateral Investment Treaty negotiations with China and prompt it to make progress on the currency and broader issues as part of the BIT process.  I also believe the Administration should devote time and resources toward attempting to establish a robust, multilateral process—either in the G20, IMF, or elsewhere—so that other countries, particularly some of China’s neighbors in Asia, can bring new points of pressure to bear.  I would hope that China would commit to this multilateral process and participate in good faith.  If China wants to be treated as a major international player, it has to own up to the responsibilities of that status.

By a similar token, if the United States wants to maintain its status as the international leader, then we better make sure that whatever we do to address China’s currency regime, we do it without losing sight of our international commitments and the overarching value of the multilateral trading system.  I am wary of panicked approaches whose supporters concede are inconsistent with our obligations, but then try to justify those inconsistencies by casually asserting that the normally applicable rules just shouldn’t apply.

So far, I’ve focused on China.  Let me close by saying I fully admit the United States needs to get its fiscal house in order.  China wouldn’t be accumulating hordes of currency reserves and U.S. Treasuries if the United States stopped racking up debt at the current unsustainable pace.

Thank you, Mr. Chairman, I yield back.

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Sen. Charles Schumer (D-N.Y.) said Tuesday he would seek a vote by May on legislation that would punish China for currency manipulation.

The public call for a Senate vote before the Memorial Day recess builds pressure on President Barack Obama to take a tougher line with the world’s fastest-rising economic power.

Tensions between the two countries have repeatedly flared up this year; Schumer’s forceful tone came as Google was on the brink of being kicked out of China for ending censorship of its search-engine results.

U.S. budget deficits are aggravating China, which holds $2.4 trillion in currency reserves, much of which is held in U.S. dollars.

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A group of 130 lawmakers from the United States sent a letter last Monday to the US Treasury calling on the Obama administration to pressure China on its exchange rate.

Accusing the Chinese government of subsidizing exports, they claimed that the “artificially undervalued” yuan is unfair to foreign competitors and puts China’s exporters at an advantage.

This laughable accusation exposes Washington’s conspiracy to mislead people from the real currency manipulator that has caused turbulences in the global financial market: the US. To transfer the impacts of the global financial crisis to foreign countries, the Obama administration has adopted a monetary policy that only aids its own economic recovery.

When the global financial crisis began to careen at the start of last year, nearly every country turned to a “de-leveraging” financial policy to reduce financial risk. But the US, by taking advantage of the dollar’s position as the world’s leading currency, attracted a large amount of capital back into the US to balance its financial debt.

As the crisis began to subside in early last March in China, the US opened its fluidity valve and embraced a monetary policy of quantitative easing. Consequently, the US capital market experienced a robust rebound, which, along with a large range of depreciation of the dollar, has prodded the US economy, especially its foreign trade, to recovery.

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SEOUL, South Korea (AP) — A North Korean firing squad publicly executed a factory worker for sneaking news out of the reclusive communist country via his illicit mobile phone, Seoul-based radio said Thursday.

The armaments factory worker was accused of divulging the price of rice and other information on living conditions to a friend who defected to South Korea years ago, Open Radio for North Korea reported on its Web site.

The man, surnamed Chong, made calls to the defector using an illegal Chinese mobile phone, the broadcaster said, citing a North Korean security agency official it did not identify. The report didn’t say when the phone calls were made.

The execution took place by firing squad in late January in the eastern coastal city of Hamhung, according to Open Radio for North Korea, a broadcaster specializing in the isolated country. The station broadcasts into North Korea, which tightly controls news.