China won support from Japan and Britain on Friday for its cautious approach to freeing up the yuan in the face of demands from Washington for a quicker rise in the currency to help ease global economic imbalances.
The threat to the world economy posed by the billowing US current account deficit, and counterpart surpluses in Asia and oil-exporting countries, will be on the agenda of a weekend meeting near Beijing of finance ministers and central bank chiefs from the Group of 20 rich and emerging countries.
"We welcome the progress to flexibility that has been made in China and know from the minister that it is the Chinese government's intention that this is the direction in which they wish to move further at a later stage," British Chancellor of the Exchequer Gordon Brown said at a news conference with Finance Minister Jin Renqing.
British officials believe quiet persuasion is likely to have more of an impact on China's policy makers than the vocal demands periodically heard from US officials and lawmakers.
Bank of Japan Governor Toshihiko Fukui, also attending the G20 meeting, said China had to go at its own pace.
"The basics are to deregulate, to ease price controls and to make the currency system more flexible," he told reporters. "These changes must be co-ordinated and conducted in a way that fits well with the reality of China's society."
China revalued the yuan by 2.1 percent to 8.11 per dollar on July 21, when it also abandoned the currency's 11-year-old peg to the dollar and switched to a tightly managed float. Since then it has let the yuan rise just 0.27 percent to 8.0885, even though the new system in theory permits the currency to rise or fall as much as 0.3 percent a day against the dollar.
"We have taken a very important step and we will continue to move forward in a step-by-step manner," said Jin, who a day earlier insisted that China alone would dictate the pace of currency reform in accordance with its national interests.
"We hope to have a managed float mechanism based on market forces and keep the renminbi basically stable at a rational and balanced level," he told reporters. The yuan is also known as the renminbi.
he slow pace has frustrated US Treasury Secretary John Snow, who urged China again this week to get a move on.
"It's less words that count, it's what happens," Snow told Reuters in Tokyo on Tuesday. "We're anxious to see the underlying value of the currency better reflected in the marketplace."
The United States reported on Thursday that its trade deficit had risen 1.8 percent in August to $59 billion, with China accounting for $18.47 billion of the shortfall.
Jin said on Thursday a stronger yuan would not correct such imbalances. Economists reckon he has a point but say a dearer yuan still has to be part of the solution because it would give other Asian countries leeway to let their currencies rise.