China has pledged to continue reforms to its exchange rate policies at the beginning of high level trade talks with the US.
Speaking at the opening of the talks, President Hu Jintao said he would seek "gradual progress" on reforming the exchange rate of the Chinese yuan.
The US argues China's currency policy unfairly favours its exporters.
North Korea will also be discussed, following its apparent attack on a South Korean warship.
Although not referring to North Korea directly, President Hu stressed that cooperation was needed to deal with "international hot spots".
China is North Korea's closest ally, and has so far refrained from openly criticising its actions.
Yuan 'undervalued'
We welcome the fact that China's leaders have recognised that reform of the exchange rate is an important part of their broader reform agenda
Meanwhile the currency is top of the economic agenda.
The US argues that the yuan is deliberately undervalued, giving Chinese exporters an unfair advantage in global markets.
"China will continue to steadily advance the reform of the formation of the... exchange rate mechanism under the principle of independent decision-making, controllability and gradual progress," President Hu said.
His comments were welcomed by US Treasury Secretary Timothy Geithner, who is leading the US delegation to China alongside Secretary of State Hillary Clinton.
"We welcome the fact that China's leaders have recognised that reform of the exchange rate is an important part of their broader reform agenda," Mr Geithner said.
He added that allowing the exchange rate to better reflect market forces would also give the Chinese private sector more incentive to move into producing higher-value goods.
China pegged the value of the yuan to the US dollar in 2008 in order to keep its exporters competitive amid falling demand due in the global recession.
Some analysts argue that the yuan is currently undervalued by as much as 40%.
President Hu gave no timetable for the exchange rate reform, however.
The BBC's Michael Bristow in Beijing says the currency is one of a number of economic disagreements to iron out between the two economic giants.
While the US has long complained about the trade deficit it has with China, he says China wants the US to lift export controls it has imposed on Beijing.
http://news.bbc.co.uk/2/hi/business/10143745.stm
I never understood why would the US pressure China to abandon its peg. As it is, China is taxing its internal producers to subsidizes exports to America. Without the peg, the US would have to sell productive assets far faster that it is to fund its trade deficit. If anything it would be China who’d be pressuring for a freer yuan. I don’t get this.
Reminds me of Qausimodo, the Hunchback of Notre Dame, fighting valiantly to beat off the attackers of the Cathedral, little realizing they were actually coming to save his beloved from death.
Or maybe it's just Bizzaro world.
My humble blog
It's easy to refute an argument if you first misrepresent it. William Keizer