China's Hu assures Bush on currency reforms

SYDNEY, Sep 6 (Reuters) Chinese President Hu Jintaoassured US President George W Bush today that Chinawould continue to reform its currency exchange system and ''let the market play an increasing role'', the White House said.

''President Bush emphasized the importance for continued steps by China on the currency issue,'' Dan Price, Bush's deputy national security adviser for international economic development, told reporters after the two leaders met ahead of an Asia-Pacific summit in Sydney.

Bush had urged China on Wednesday to help reduce trade imbalances by floating its currency, a major irritant in relations between their countries.

In 90 minutes of talks today, Bush also pressed Hu about the safety of Chinese products, assuring him that such concerns did not amount to U.S. trade protectionism, the White House said. Hu insisted he took the matter seriously.

US critics say China's yuan is significantly undervalued, giving Chinese exporters an unfair advantage in global markets and contributing to a large U.S. trade deficit with China, which has one of the world's fastest-growing economies.

Bush is under pressure from the Democratic-led Congress to take a tougher stand with Beijing on the currency issue as well as product safety. Chinese officials have maintained that any economic reforms must not threaten economic stability.

''President Hu indicated that China would continue to reform the currency exchange system and let the market play an increasing role,'' Price said.

TAIWAN The two leaders also dealt with the thorny issue of Taiwan,with Hu telling reporters that Bush ''explicitly stated the US position consistent with a position of opposing any changes in the status quo (of the island)''.

The White House acknowledged Bush had voiced concern about a plan for Taiwan voters to decide next March on a referendum on seeking UN membership, and said he remained against the idea.

China regards the self-ruled island as part of its territory, and has vowed to reunite Taiwan with the mainland, by force if necessary.

The United States dropped ties with Taiwan more than 30 years ago when it normalised relations with China, but it has also pledged to help defend the island and opposes its bid for UN membership as a dangerous provocation of Beijing.

Bush said the two had also discussed product safety and that Hu was ''quite articulate'' on the subject.

The White House later made clear that Bush had pressed Hu on the issue and that the Chinese president insisted his government ''took this problem very seriously''.

In recent months, the quality of Chinese exports to the United States has come under the spotlight following a series of scandals and product recalls.

Hu also said climate change was an important issue with implications for sustainable development and said it should be tackled through stronger international cooperation.

Bush has insisted on the importance of getting China, a fast-growing developing economy, on board for any international effort to control global warming.

China is coming under increasing international criticism over its carbon dioxide emissions, expected to overtake US emissions by 2008.

But its leaders have rejected caps on output for fear they will cramp growth.

REUTERS JK BD1748