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Bernanke Backs Off Calling Weak Yuan a 'Subsidy'
Reuters | December 15, 2006 | 12:12 PM EST

U.S. Federal Reserve Chairman Ben Bernanke recommended Friday that China allow a more flexible currency, saying a stronger yuan would improve the lives of ordinary Chinese and help to ease global trade imbalances.

Bernanke was in Beijing with a delegation led by U.S. Treasury Secretary Henry Paulson, who said Chinese officials pledged to allow more currency flexibility -- a move long sought by Washington -- though he gave no timetable.

A stronger yuan would raise living standards and make China's economy more stable, boosting domestic consumption to balance booming exports, Bernanke said in a speech at a government think tank.

He said a more flexible exchange rate also would give Beijing more effective more control over inflation.

"More flexibility in the RMB would have important advantages for China," the Fed chairman said, referring to the Chinese currency by one of its names, the renminbi, or people's money.

Washington has been pressing Beijing to raise the value of the yuan, arguing that it is undervalued and gives Chinese exporters an unfair price advantage, hurting U.S. companies. Some American lawmakers have threatened to impose tariffs on Chinese goods to compel Beijing to move faster in easing currency controls.

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