Hu: Dollar-based system from 'the past'

Jan. 16, 2011 at 2:46 PM
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BEIJING, Jan. 16 (UPI) -- China views the dollar-based world currency system as a "product of the past," President Hu Jintao said.

Answering questions submitted by The Wall Street Journal and Washington Post before his state visit to Washington this week, Hu admitted "some differences and sensitive issues," but did not mention divisive matters like U.S. arms sales to Taiwan.

Questions about imprisoned Nobel Peace Prize winner Liu Xiaobo, China's growing naval power and alleged Chinese cyberattacks were not answered.

Hu dismissed an American argument for why China should appreciate its currency, that it will help stem inflation. The United States accuses China of unfairly promoting its exports by undervaluing the yuan.

Obliquely referring to the U.S. Federal Reserve's huge bond purchases to keep down long-term interest rates, Hu said U.S. monetary policy "has a major impact on global liquidity and capital flows and therefore, the liquidity of the U.S. dollar should be kept at a reasonable and stable level."

Beijing fears not only that loose U.S. monetary policy is stimulating inflation, he said, but that it will erode the value of China's vast dollar holdings.

"The current international currency system is the product of the past," Hu said, noting the dollar's primacy as a reserve currency.

Topics: Hu Jintao
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