China says yuan not main cause of trade imbalance

BEIJING: China said Thursday the value of the yuan was not the main cause of the Sino-US trade imbalance, after Washington said it would raise the issue when Chinese President Hu Jintao visits this month.

Foreign ministry spokesman Hong Lei instead named the "international division of labour" and US export restrictions on high-tech products as contributing factors to China's trade surplus with the United States.

Hong told reporters that China would continue to advance reform of its exchange rate mechanism, adding it 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, referring to the yuan by its official name.

His comments come as Hu prepares for a state visit to Washington on January 19. US President Barack Obama is expected to raise the sensitive issues of trade and currency reform with Hu 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.

Before Hu heads to Washington, US Defence Secretary Robert Gates will visit China from Sunday -- one year after Beijing cut military ties with Washington in protest against US arms sales to rival Taiwan.

The two nations have since resumed low-level military contacts at a technical level and Gates will visit at the invitation of his Chinese counterpart, Liang Guanglie.

"China... expects the visit to further increase mutual understanding and trust between the two militaries, enhance our military cooperation level and promote sound and stable military-to-military relations," Hong said.