NEW YORK -- China hinted on Wednesday at a willingness to let its currency strengthen, a welcome shift that surprised countries around the globe that complain the persistently weak yuan is a giant subsidy for the Asian nation's exports.

For the past year, China has held the yuan steady with the U.S. dollar, as the greenback plunged against other currencies such as the loonie and euro. The drop is making China's already cheap exports even less expensive while discouraging the country from importing goods from other developed and developing nations because they are more costly.

Barack Obama, the U.S. President, pledged yesterday to bring up the issue with officials in Beijing as he gets ready to embark on his first official visit to China next week.

"Currency, along with a host of other issues, will come up, and I'm confident that both the United States and China can arrive at a broad set of policies that encourages trade that benefits both countries, that allows ongoing economic growth," Mr. Obama told Reuters in an interview.

Despite the increasing rhetoric against China's weak yuan policy and the country's apparent new-found openness to allowing the currency to appreciate, currency experts and other observers aren't expecting a surge in its value anytime soon.

"China tends to be a good host, but I don't think Obama is going to have any more luck than [European Central Bank president Jean-Claude] Trichet or [International Monetary Fund managing director Dominique] Strauss-Kahn," said Marc Chandler, chief currency strategist with Brown Brothers Harriman in New York. "Beijing isn't going to let its foreign-exchange policy be moved by what foreigners say."

Mr. Obama will have to tread lightly so as not to anger the Chinese government, America's largest creditor with US$800-billion of U.S. debt.

Generally, China has been loath to let its currency appreciate because its exports have stumbled amid the global economic downturn.

Any move to increase the value of its currency will probably only come if China's exports get a boost from a global recovery, inflation picks up or the country gains more clout at the International Monetary Fund that would reflect the shift in global economic power, said Mr. Chandler.

Currency market specialists and global trade experts were surprised and somewhat puzzled by China's departure yesterday from its long-used language that simply said it would keep its currency "basically stable at a reasonable and balanced level."

In its latest quarterly monetary policy report, the People's Bank of China said it would consider major currencies, not only the U.S. dollar, in guiding its exchange rate. The move would end an effective peg to the U.S. dollar that has been in place for the past 18 months.

"Following the principles of initiative, controllability and gradualism, with reference to international capital flows and changes in major currencies, we will improve the yuan exchange rate formation mechanism," the central bank said in its 46-page monetary policy report.

George Androulidakis, director of foreign exchange at National Bank of Canada, said the report could just be "saber-rattling."

"Maybe it's a signal to the U.S. government to be a little more serious about its strong dollar policy," he said.

Timothy Geithner, the U.S. Treasury Secretary, reiterated yesterday while traveling in Japan that maintaining a strong U.S. dollar is "very important" to America's economy.

But as the U.S. government has made similar comments in support of the greenback, it has tumbled 13% against a basket of major currencies since the middle of February.

The last time China's currency saw a major bump was after a landmark revaluation in July 2005 that saw the yuan jump 20% against the U.S. dollar.

"It's really hard to make anything of this new development," said Peter Morici, a professor of international business with the University of Maryland and former chief economist at the U.S. International Trade Commission during the Clinton administration. "The yuan has been stuck against dollar since July 2008... I don't think Obama has the character to do anything about it. He gives a great speech but he's a very weak President."

Financial Post