Issues Between U.S. And China May Overshadow Summit On Containing Spread Of Nuclear Material (JPM)

Bloomberg reports that at a summit to be held in Washington, where world leaders will be discussing the spread of nuclear materials, the U.S. president, Barack Obama, and his Chinese counterpart, president Hu Jiantao, will be keen to narrow down their differences over currency, trade and Iran in a personal meeting before the event commences. Jing Ulrich, the Hong Kong-based Chairwoman for China equities and commodities at JP Morgan Chase & Co. (NYSE: JPM) says that China and the U.S. “are the two superpowers in the world, geopolitically and economically.” She adds that, “When people talk about G-2, they say that for a reason.”

For Obama and Treasury secretary Timothy Geithner, one of the most important issues with China is its policy of pegging its currency at 6.48 to the dollar. Both of them believe that diplomacy will work better than exerting pressure on China to let the yuan strengthen. In an interview with Bloomberg television on April 2, Geithner said that the U.S. strategy is “designed to increase the odds that China does decide to do what’s in their interest, which is to let their currency start to move up again.” Geithner has delayed the delivery of a report to Congress over exchange-rate policies.

New York senator Charles Schumer has demanded passing legislation that will pressurize China to raise the value of yuan. There is a speculation that Chinese officials may well allow its currency to rise. On April 8, 2010, Geithner made an unscheduled stop to China’s capital, Beijing, for talks with Chinese vice Premier, Wang Quishan. Robert Hormats, U.S. Undersecretary of State, whose portfolio includes economic affairs, had a private meeting with Chinese Vice President, Xi Jinping, over the same issue the next day. On the issue of the yuan “there is a positive cooperation" between the two countries believes Hormats. Specific actions or speculations of measures to be taken or the timing of any move “doesn’t serve anyone’s interest and tends to be counterproductive,” says Hormats.

According to Commerce Department data, last year, the U.S trade deficit with China was $227 billion. This deficit is wider than any other nation. Nicholas Lardy, a senior fellow in Washington at the Peterson Institute for International Studies, says, “When the Chinese become more confident that we’re getting past the crisis, they will be likely to relax the yuan-dollar peg.” Apart from the yuan issue, Obama-Hu agenda will discuss the issue of Iran and North Korea. China is one of the important players in helping to prevent the nuclear ambitions of these two nations.