Yuan debate overcomes Boao boredom factor

China's President Hu Jintao travels to Washington this week to attend the nuclear summit.

On the southern Chinese island of Hainan, where 2,000 business leaders, senior politicians and academics have been meeting, the consensus was that his decision to go showed the relationship between the two nations is on the mend after a difficult few months.

The Boao Forum for Asia, an annual event, can feel a little sterile.

But it attracts big names. Former US treasury secretary Henry Paulson was here. Xi Jingping, the man touted as China's next leader gave the keynote address.

However, there is little of the cut and thrust of debate you might find at similar events in other countries and much of the discussion takes place away from the eyes of the media.

The conference organisers make no apologies for this.

'Bit boring'

Asians are more cautious, more conservative than those in the West they argue, and in China, the company chief executives and senior politicians are only going to speak freely if they know they're not going to be quoted.

At the gala dinner, the tables set out on a golf course as pristine as any, one delegate from overseas admitted that some of it had been "a bit boring".

The real value of Boao though was, he said, the access you got to important Chinese and Asian figures in business and politics as they relax here in the bars, over lunch or on the links.

And certainly outside the halls and meeting rooms where the formal events were taking place the delegates, both Chinese and international, were more forthcoming.

The question of whether Beijing should abandon its currency's de facto dollar peg was getting a lot attention.

"There's no perfect time for this," said Chen Zhiwu, professor of finance at Yale School of Management. "But I predict within one to two weeks something will be announced."

GDP figures

China's economy has recovered faster, and more strongly than almost any other.

First quarter GDP figures due out this week are expected to show growth of more than 11% year on year.

Washington has told Beijing repeatedly that with growth like that the time has come to allow its currency to start appreciating again.

The yuan rose in value by 21% over three years to mid-2008, but the process was halted when the financial crisis hit.

Professor Chen says a debate between different ministries in Beijing, with the commerce ministry pushing for the 'peg' to be kept to help exporters, while the central bank and others argue for a gradual appreciation, has held up the decision.

But that debate within government is now over he believes.

"The Chinese media have been changing their tone, and that implicitly tells us the official policy is going to switch," he said.

He was booked to discuss the issue on the state controlled TV network CCTV he explains, but then a few days ago the subject was changed.

"Usually given how things are done in China that means the propaganda department wanted to put a stop to it. There's less room for discussion because the government has decided, so they don't want different opinions to be aired in the official media."

'Polite'

Chi Schive, the chairman of Taiwan's stock exchange had another explanation for the time it's taken to see a move from China on this issue.

"There is a difference between Eastern and Western culture," he said. "Over there [in the West] if you are not doing the right thing people just tell you you're wrong."

"In Chinese culture, we prefer to try to be polite to everyone. So it took time for the United States to realise how to deal with this, to play it down, to say 'I'm not pushing you, I'm wishing you to change your policy'."

Most here agreed that politicising the issue had been a mistake.

'Improved' relations

The most senior member of the Obama administration to turn up for the Forum was Robert Hormatz, an Under Secretary of State.

He refused to be drawn on the specifics of the currency debate, but did insist that the bilateral relationship had "improved significantly" over the last few weeks.

This was due to the fact that both sides had recognised that "frictions were developing that we couldn't afford to have," he said.

With several meetings scheduled between the two country's presidents over the next few weeks at different global summits "this was a moment to get control of these issues, address them and make sure they don't get out of hand".

'Value chain'

The economic arguments for appreciation appeared to have been accepted by many of the Chinese delegates here.

Zhang Xin, a real estate tycoon said she believed a flexible Chinese currency "was in the interests of the country".

"Putting aside the politics of the US and China, the appreciation of the yuan will ultimately help the Chinese economy grow into a higher 'value added' economy, no longer just competing by cutting prices but moving up the 'value chain'," she said.

But she had a warning for those politicians in the United States and others who have been pressing China on this issue - be careful what you wish for.

"Say their wish is granted. The currency is significantly stronger. Then you will face a much richer Chinese people, a much stronger China. Is that in the interests of the United States?"