China's Hu heads to G20 amid pressure over yuan, N.Korea

BEIJING, June 23, 2010 (AFP) - China's President Hu Jintao left Wednesday for the Group of 20 summit in Canada where he could face new pressure over Beijing's currency controls and world efforts to rein in ally North Korea.

Hu will pay a three-day state visit to Canada before attending the weekend G20 meeting in Toronto, accompanied by central bank head Zhou Xiaochuan, commerce minister Chen Deming and others, the foreign ministry said.

It will be his first international appearance since the central bank at the weekend pledged further reform of the yuan and also comes after a report in May blamed North Korea for the deadly sinking of a South Korean ship.

The People's Bank of China's announcement on the yuan Saturday fuelled expectations that Beijing would loosen its grip on the currency.

However, Beijing has doused hopes for a large revaluation sought by trading partners such as the United States, and Hu could face calls for a further commitment to free up the currency.

World leaders "are going to want more reassurance and more details on what China has in mind", said Patrick Chovanec, an economist at Tsinghua University in Beijing.

"They will want reassurances that this is a genuine commitment on China's part."

Critics, especially in the US, say China keeps the yuan undervalued as much as 40 percent to protect exporters, costing Americans jobs.

Members of Congress -- facing mid-term elections in November -- have threatened trade sanctions against China and have pushed for action at the G20.

However, China's foreign ministry warned Tuesday against bringing the yuan up at the G20.

Summit participants should avoid "playing the blame game and imposing pressure" over foreign exchange rates, ministry spokesman Qin Gang said.

The yuan pledge initially was seen as reducing the chances of a G20 clash but China has already triggered renewed complaints by ruling out large swings in the currency or a one-off revaluation.

On Tuesday, Beijing slightly adjusted its tightly controlled yuan trading band to allow the currency to strengthen against the dollar, in the first concrete step to deliver on the flexibility promise.

But on Wednesday it went the other way, setting a weaker trading level.

China has also been under pressure to join efforts to punish North Korea after the rogue communist state was accused of torpedoing the South Korean warship in March, killing 46 seamen.

Seoul and Washington, citing a multinational probe last month that blamed the North, are seeking a UN resolution condemning Pyongyang.

China, however, has refused to denounce North Korea -- which Beijing helps sustain through trade, economic aid and diplomatic support -- issuing only mild calls for restraint and giving no indication it would support UN action.

Experts say China fears siding against Kim Jong-Il's government could destabilise it, potentially leading to regime collapse and a refugee crisis on its doorstep.

China's position "exposes the hypocrisy" of its calls for world peace and good-neighbourliness, security experts Bonnie Glaser and Brad Glosserman wrote in a recent analysis.

This position "will only encourage North Korean provocations and jeopardise the peace and security that China and other nations in Northeast Asia seek".

But China has shown it is not immune to foreign pressure, voting this month for new UN Security Council sanctions on Iran over its nuclear programme.

Western nations suspect Tehran is seeking to develop nuclear weapons, which it denies. China, Iran's key trade ally, had long resisted Western calls to back punishing Tehran, advocating negotiations instead.

Qin would not confirm whether a meeting with US President Barack Obama would take place at the G20 in which Obama could press his demands.

Hu, meanwhile, will likely meet Japan's new Prime Minister Naoto Kan and new British Prime Minister David Cameron for the first time.

Before the summit, Hu will meet Canadian Prime Minister Stephen Harper, Qin said.