As the U.S. President Barack Obama vowed to get "much tougher" with China on exchange rates and trade, economists from Beijing said China should not give in to increased U.S. pressure that stems from its domestic problems.

Obama's talk of putting "constant pressure" on China to strengthen the yuan so to ensure the price of U.S. goods was not artificially inflated has drawn heated comments from economists in Beijing.

"His words are only aimed to appeal to domestic interest groups," said Tan Yaling, an expert at the China Institute for Financial Derivatives at Peking University.

Given China's growing international clout and the lack of jobs in the United States, Obama will certainly try to make China change its currency policy as this is an easy way to weaken China's export industry, she said.

It was also a relevant tactic given the President was losing ground in opinion polls and facing tough conditions leading up to the mid-term election later this year, she said.

Although the U.S. economy recovered to 5.7 percent growth in the fourth quarter last year, a record high in six years, jobless rate surged to more than 10 percent.

Fiscal deficit is set to hit 1.56 trillion U.S. dollars in 2010, or 10.6 percent of its GDP, a new record since the Second World War.

In the State of the Union Address on Jan. 28, Obama made it clear he would focus on jobs in 2010 and pledged to double exports in five years which could create 2 million jobs in the States.

Tan Yaling said Obama's export drive could not fix the job problem, while a stronger yuan would add costs for U.S. consumers.

Resist pressure

It's an old trick for the U.S. to force its major trade partners to appreciate their currency to help itself in a time of crisis, said Zhang Yansheng, director of the Institute of Foreign Trade of the National Development and Reform Commission.

"China's reforms, including exchange rate reform, should be independent of other countries," he said.

He noted China's currency policy should comply with the country's macroeconomic conditions and industry restructuring. As many exporters' sales were just starting to pick-up, a rising renminbi would hurt their fragile recovery.

Many foreign experts also agreed that the appreciation of the renminbi would not remedy the global economic imbalance.

A 20 percent rise in the yuan and other major Asian currencies would at best lead to a rise in U.S. exports worth 1 percent of gross domestic product, as the International Monetary Fund (IMF) estimates suggested, said Olivier Blanchard, Economic Counsellor and Director of the Research Department of IMF.

"I think it's very important not to bash China over the RMB. What China should do, and is actually doing, is to decrease its saving rate, thus increase domestic demand, and reorient production to satisfy this higher domestic demand," he said in an interview with Reuters on Jan. 29.

The renminbi has gained around 21 percent since July 2005 when the government delinked the yuan from the U.S. dollar. However, China's trade surplus with its major trading partners did not fall accordingly.

"The exchange rate of renminbi is not the main reason for the Chinese-U.S. trade deficit," Foreign Ministry Spokesman Ma Zhaoxu said Thursday.

"We expect the United States to view bilateral trade issues rationally and to negotiate fairly. Accusation and pressure would not bring a solution," said Ma.

Accusation unreasonable

Ma Zhaoxu's remarks were echoed by some analysts as they said the main reason for the enormous trade gap, instead of the exchange rate, was the U.S. restriction on high-tech exports to China.

"Although there's a massive demand in China for technology and industrial equipment amid its industrialization drive, this is ignored by the U.S.," said Zhao Jinpin, Deputy Director of the Foreign Economic Relations Department of Development Research Center under the State Council, China's cabinet.

The U.S. limitation could date back to the United States Policy Regarding Trade with China in 1949, also known as NSC 41.

During the Cold War, the restricted items for exports to China more than doubled compared to those to the Soviet Union.

Only 8 percent of China's high-tech imports were from the United States, sharply down from 18.3 percent in 2001 because of the policy limitation.

In 2007, U.S. Department of Commerce unveiled a new export control regulation, known as China Rule, imposing additional licensing requirements for exports on high-tech products in 31 entries to China, including aircraft and aircraft engines, avionics and inertial navigation systems and high performance computers.

Zuo Xiaolei, chief economist of the China Galaxy Securities, said the international trade balance should be based on the nations' comparative advantage. High-tech products were the U.S.'s strength, and the export limitation was not fair.

Zhang Yansheng said a stable yuan was a necessary measure to get through the crisis.

As Chinese leaders have repeated on various occasions that a stable renminbi is what China contributed to the world in times of crisis.

Zhang Yansheng said it seemed China was caught in a dilemma. "If China lets the yuan weaken to shore up exports, it is called 'irresponsible'; However, if it did not do so, it is accused of 'manipulating' the currency. It is really vexing problem."

Nobel Prize Winner Andrew Michael Spence has noted in an article on the Financial Times that "the west is wrong to obsess about the renminbi".

"The singular focus on the exchange rate appears based on the assumption that it is the key cause of the surplus and the main policy instrument for removing it. The reality is more complex. Exchange rate appreciation by itself will not get rid of the trade surplus." he said.

"China will allow its currency to rise in the long run. But it is China to say when, not the United States," Zhang Yansheng said.