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Wen wants to avoid U.S. trade war

Wen gestures after ringing the opening bell at the New York Stock Exchange.
Wen gestures after ringing the opening bell at the New York Stock Exchange.

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(CNN) -- Chinese Premier Wen Jiabao says the purpose of his visit to the United States is to seek friendship, and not to fight a trade war with the world's biggest economy.

"We should not and will not fight a trade war," he said in a speech to the American Bankers Association in New York Monday.

The text of Wen's speech was released by the Chinese Embassy in Washington.

Wen's comments come against the backdrop of the massive trade surplus that China, the world's No. 6 economy, runs with the United States.

That surplus, likely to reach $130 billion a year -- up from $102 billion in 2002 -- is a source of friction in the relationship between the two global giants.

The United States recently put curbs on some exports of Chinese textiles and television sets. In return, China threatened to impose duties on some U.S. goods.

Wen's speech in New York came on the eve of his visit to Washington, where he is scheduled to meet Tuesday with President George W. Bush.

Along with key political issues such as Taiwan and North Korea, high on the agenda for the Wen-Bush meeting are the twin economic issues of China's currency exchange regime and its fast-growing trade surplus with America.

China has come in for criticism from the Bush administration over the pace of its market reforms and the value of its currency, which is fixed at about 8.28 yuan to the dollar.

U.S. businesses claim the yuan is too cheap and should be revalued, because it gives Chinese exporters an artificial advantage on global markets.

Beijing's view is that a move to greater yuan flexibility is desirable, but it will not happen soon, a view echoed by analysts.

While China "would sound conciliatory" about the yuan, it was not able to act in the short term, because a revaluation would be too destabilizing for its economy, Hong Kong-based Asia chief economist for Morgan Stanley, Andy Xie, told CNN Tuesday.

In October, Chinese President Hu Jintao told the 21 members of the Asia Pacific Economic Cooperation grouping in Bangkok the issue needed more study.

Not the solution

The United States capped some Chinese textile imports last month.
The United States capped some Chinese textile imports last month.

In his New York speech on Monday, Wen said reducing Chinese exports was not the solution to the U.S. trade deficit with China.

"A more realistic solution is for the United States to expand its exports to China," Wen said, according to the text released by the Chinese Embassy.

Putting curbs on China's exports to the United States would "seriously harm" the interests of millions of American consumers and U.S. firms operating in China, Wen said, making products more expensive.

Two-way merchandise trade 2002
1. United States $1806 billion
2. Germany $1105.5 billion
3. Japan $752.4 billion
4. France $655.9 billion
5. China $620.8 billion
Source: WTO

Indeed, Morgan Stanley's Xie said trade ties between the two was taking on political hues in the leadup to U.S. elections next year, and in reality total U.S. imports from East Asia were actually declining.

What was happening was a "redistribution of exports", meaning goods previously sent from Japan and Taiwan to the United States were now increasingly being exported by China instead, Xie said.

In the longer-term, China needs to expand the market share for U.S. companies in China, for example in the automotive market, Xie added.

Wen said problems related to the currency exchange rate and intellectual property rights came with the big expansion in China-U.S. trade, and could be ironed out gradually.

Deal signed

During his time in New York, Wen visited the New York Stock Exchange and rang the bell to open Monday's trading.

Earlier, the United States and China signed a five-year agreement aimed at creating a more level playing field between the two nations in shipping of imported goods.

At the signing in Washington Monday, U.S. Transportation Secretary Norman Y. Mineta said, "This agreement offers U.S. companies similar privileges to those that Chinese companies already enjoy in the United States."

The deal will allow U.S. shipping companies to enjoy broad new rights in doing business in China.

It does not alter the current arrangement on imported goods but rather deals exclusively with the logistics of shipping those goods.

Through an interpreter, China's Minister of Communications Zhang Chunxian said the agreement will furnish a good legal framework for the development of Chinese-U.S. maritime relations.

He said the agreement also shows that China will continue its efforts to fulfill its World Trade Organization commitments in maritime transport.

-- CNN Producer Sally Holland contributed to this report

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