The U.S. and China agree on the "direction of reform" for the yuan exchange rate, but with a different focus, Chinese Vice Finance Minister Zhu Guangyao said Friday.
The U.S. is focused on pushing the yuan higher, while China aims to deepen its reform of the exchange rate, Mr. Zhu said at a press briefing on the upcoming China-U.S. Strategic and Economic Dialogue, an annual high-level meeting of U.S. and Chinese officials taking place in Washington D.C. Monday and Tuesday.
"China is upholding our reform goal, which is to deepen the direction of reform of the yuan exchange rate. The U.S. puts greater emphasis on the extent of yuan appreciation," Mr. Zhu said.
Mr. Zhu didn't specify what he meant by "the direction of reform," but Chinese officials have said numerous times that they aim to gradually increase the flexibility of the yuan exchange rate.
Mr. Zhu reiterated that the yuan exchange rate is a sovereign matter for China, and is part of China's overall macroeconomic policy framework. He said China appreciates that the U.S. consistently recognizes this fact whenever the issue is raised between the two countries.
The Chinese currency has risen more than 10% against the dollar in real terms, meaning accounting for Chinese domestic inflation, since June 2010, when China loosened the yuan's de facto peg to the U.S. currency, Mr. Zhu added.
He also said China's trade deficit in the first quarter shows the country has made some progress in expanding domestic demand.
While it can't be ruled out that China may post more trade deficits in coming months, China will still likely record "balanced trade with a modest surplus" this year.
China posted a rare $1.02 billion trade deficit in the first three months of the year, its first quarterly trade deficit in seven years.
Many analysts, however, dispute that the deficit is indicative of any fundamental rebalancing of the Chinese economy, arguing it more due to higher prices for imported commodities.
Eswar Prasad, a China scholar at the Brookings Institution in Washington, said the decline in China's current-account surplus is due to cyclical rather than structural reasons, and he expects the surplus to grow again in the second half of the year.
China is paying close attention to debate over deficit reduction in the U.S., Mr. Zhu said, adding that China hopes the U.S. will adopt effective fiscal consolidation measures. Nonetheless, the most important thing currently is that the U.S. maintains its economic recovery, he added.
China is the largest foreign holder of U.S. bonds. Both sides are expected to discuss the outlook for U.S. debt during the dialogue.
