SHANGHAI, China — For months, economists have expected Beijing to start boosting the value of its currency about now to ease strains in its fast-growing economy. The big question: Would Chinese leaders put off changes to avoid looking weak in the face of mounting U.S. pressure for action?

Washington has helped to defuse that conflict with conciliatory gestures including Thursday’s impromptu visit to Beijing by U.S. Treasury Secretary Timothy Geithner. Now analysts expect Chinese leaders to go ahead and let the yuan rise, possibly as soon as within the next few weeks.

“Now that the U.S. has given China more political breathing room, the Chinese can go ahead and do what they were going to do anyway, which is to resume gradual appreciation,” said Andy Rothman, macroeconomics strategist for CLSA Asia-Pacific Markets.

Beijing tied the yuan to the dollar for decades but broke that link in 2005, allowing it to rise by about 20 percent through late 2008. The government slammed on the brakes after the crisis hit and has since held its currency steady against the greenback, saying China cannot afford further change after losing millions of factory jobs to the plunge in global demand.

Washington and other trading partners complain that Beijing keeps the yuan undervalued by up to 40 percent, giving its exporters an unfair price advantage and swelling its trade surplus. Some American lawmakers are pushing for punitive tariffs on Chinese goods if Beijing fails to act.

Chinese leaders have their own reasons for allowing the yuan to rise. A stronger yuan would boost Chinese consumer spending power, easing reliance on exports. It would narrow China’s politically volatile trade surplus, making the flood of foreign money pouring into the economy more manageable.

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Economists long expected Beijing to act before the middle of this year so long as exports and economic growth were solid, and March trade data due out next week are expected to be healthy. Still, they caution that any increase will be gradual and is unlikely to narrow U.S. and European trade deficits and create jobs.

China’s central bank agitated for the change but faces opposition from the Ministry of Commerce, which argued that exporters of low-profit goods such as shoes and toys would be priced out of foreign markets, threatening job losses and unrest.

Facing pressure to create American jobs, President Obama vowed in early February to “get much tougher” in trade disputes with China and to press for an end to currency regimes that he said depress export prices and put U.S. companies at a disadvantage.

Such prodding made a change politically unpalatable to Chinese leaders. In a nationally televised news conference in March, Premier Wen Jiabao rejected foreign “finger-pointing” to force currency appreciation and said the yuan was not undervalued.

“No government wants to look like it’s acting under foreign coercion,” said Rothman.

In recent weeks, Obama has backed off the confrontational stance. The Treasury postponed issuing a report to Congress due in April in which it had the option of declaring Beijing a currency manipulator.

In another sign of warming ties, Chinese President Hu Jintao is due to hold talks with Obama during an April 12-13 visit to Washington for a nuclear security summit.

“A better public opinion environment might make it easier for the decision-makers by giving them more leeway to decide currency policy,” said Yu Wanli, a professor at Peking University’s Center for International and Strategic Studies.

 


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