AGENCE FRANCE-PRESSE

President Hu Jintao says he plans to loosen the yuan's decade-old peg to the US dollar, but only under the right conditions.

He made the comment during a one-hour meeting with US President George W. Bush on the sidelines of the Apec summit.

Apart from the exchange rate, the two leaders also discussed the record growth in Sino-US trade, said He Yafei , a senior Foreign Ministry diplomat.

"We will continue to push forward reform on the yuan exchange rate, while maintaining overall stability in our economy," Mr Hu was quoted as telling Mr Bush.

He indicated that Beijing would strive to prevent wild fluctuations in the yuan exchange rate if and when the peg was loosened, Mr He said.

Mr Hu thanked Mr Bush for resisting calls by some US lawmakers and business leaders for trade sanctions against the mainland over the yuan-dollar peg, the official said.

For its part, the United States appeared content with Mr Hu's commitment to move on the yuan peg, despite the lack of specifics over when and how Beijing would implement the move.

A senior US administration official said: "It was a clear commitment, but it was not a commitment that got into the tactics of how, exactly, they would move towards what President Hu said they would do, which is a flexible exchange rate that reflects market factors."

Many US exporters complain the yuan is undervalued at about 8.3 to the dollar, giving China an unfair advantage by making its exports cheaper and other countries' exports to China more expensive. With the recent fall of the dollar, the yuan is also declining, sharpening its competitive edge.

Meanwhile, the euro scaled a peak of US$1.3067, flirting with a record-high 1.3074 seen on Thursday.

Beijing indicated on Friday that it would not move on yuan reform until the dollar's slide had stabilised. Wang Xiaolong, a senior Foreign Ministry official in charge of economic affairs, said: "As a major country having ownership to the most important currency in the global economy, I think the United States has the responsibility - as much responsibility as do the others - to act, to take the necessary actions to restore equilibrium.

"We will wait and see [on yuan reform] because ... first, we haven't seen the reaction of some of the other players, and secondly, we will have to see what the impact of the recent fall of the dollar will be on the world economy."