China Inflation helpful to the Hu-Obama Summit

Rising inflation in China that is causing headaches for coach outlet online President Hu Jintao at home may help relieve tensions with the U.S. over the yuan as he prepares to meet President Barack Obama in Washington next week.

Prices are climbing faster in China than in the U.S., making Chinese goods less competitive, Treasury Secretary Timothy F. Geithner said this week. Chinese officials may also seek to speed up gains in the currency, also known as the renminbi, to fight inflation, lowering the cost of imported U.S. goods such as Boeing Co. aircraft and Microsoft Corp. software.

Hu may seek the easing of a U.S. coach purses outlet ban on technology exports, while Obama is likely to focus on access to Chinese markets, lower subsidies for companies and cooperation on North Korea. Meantime, the U.S. economic recovery and new Republican leaders in Congress who don’t see the yuan as a priority may coach outlet online also help make the issue less contentious, said Michael Paulus, who heads the Asia Public Sector Group at Citigroup Inc. in Hong Kong.

“That the renminbi is starting to get on a track that people feel somewhat comfortable with takes it off the front burner,” former Treasury official Paulus said in an interview. “The people at the White House and the Treasury and elsewhere will not try to downplay it, but not play it up either.”

Geithner, speaking in Washington coach outlet online on Jan. 12, said that while the yuan was still “substantially undervalued” the “fundamental forces that are pushing Chinese productivity growth and are pushing inflation higher will bring about the necessary adjustment in exchange rates.”

Factoring in rising prices, the erosion of Chinese companies’ advantage over U.S. rivals was equivalent to the yuan strengthening at an annual rate of about 10 percent, he said.

Trading Range

The yuan’s trading range, set each morning by the People’s Bank of China, is increasingly linked to political events between China and coach outlet online the U.S. Shares in the exchange-traded, New York-based WisdomTree Dreyfus China Yuan Fund gained 3.1 percent in the month leading up to a scheduled Oct. 15 release of a Treasury report on whether China manipulates its currency, which was delayed. Shares fell 1 percent over the next two weeks. In the first three days of this week the fund gained 0.51 percent.

Last year Obama and Congress pushed China repeatedly to speed up yuan gains amid historically high unemployment. The jobless rate reached a 26-year peak of 10.1 percent in October 2009, and is now at 9.4 percent.

Obama said after meeting Hu in November that China is spending “enormous amounts of money” to keep the yuan undervalued. Democrats in the House pushed through a measure, which never saw a vote in the full Senate, making it easier for U.S. companies to seek movado watch penalties against Chinese imports because of an undervalued currency.