China hints at addressing US concerns on yuan

In a move that is commentators view as conciliatory, in its talks with the US China has vowed to spur domestic demand and would make a guarded opening to exchange rate reform, which the Obama administration says is needed to rebalance the global economy.

The US on its part welcomed Beijing's long-standing pledge to reform the yuan as the second strategic and economic dialogue between the two sides got underway.

Both countries agreed that a stronger Chinese currency would by itself not be enough to narrow the huge US bilateral trade deficit that has given rise to tensions between them, especially at the current juncture, when the global economic recovery remains fragile.

Though Chinese president Hu Jintao brought no fresh initiative on the yuan dispute, his amicable approach set the tone for the two days of talks during which the world's biggest and third-biggest economies hope to strengthen relations.

"China will continue to steadily advance reform of the renminbi exchange rate formation mechanism following the principles of being independent, controllable and gradual," Hu said. The yuan is also known as the remnibi.

According to Hu, his government would seek to expand domestic demand to create more balanced growth which is in line with what Washington has been pushing.