CHINA AND JAPAN AGREE TO NEW CURRENCY DEALINGS / THE NEW YORK TIMES ( VERY HIGHLY RECOMMENDED READING )

December 26, 2011

China and Japan Agree to New Currency Dealings

By EDWARD WONG



BEIJING — China and Japan have agreed to start direct trading of their currencies, officials announced during a visit here by Japan’s prime minister, Yoshihiko Noda.


The move was among several that emerged from Mr. Noda’s meetings with President Hu Jintau, which on Monday focused on how the two nations could work together to maintain peace on the Korean peninsula.


Japan will also apply to buy Chinese bonds next year, allowing it to accumulate more renminbi in its foreign-exchange reserves.


China is the world’s second-largest economy while Japan is the third largest, and the currency agreement is part of a move away from using dollars.


Chinese officials have said recently they would like to broaden the global use of the renminbi, also known as the yuan, and want to see more countries move away from relying on dollars as the worldwide currency.


Economists say, though, that the renminbi will not compete with the dollar or the euro anytime soon as a dominant currency in international trade.


The meeting was the first between Mr. Hu and a leader of another East Asian nation since North Korea announced the death of its longtime leader, Kim Jong-il, and it underscored the widespread questions about the north’s course without its cultlike head of state.


Mr. Noda had originally scheduled the two-day trip to Beijing to talk about strengthening bilateral ties between China and Japan, an agenda the countries did not abandon despite the focus on Mr. Kim’s death. State news broadcasts in North Korea have been proclaiming Mr. Kim’s youngest son, Kim Jong-un, the “Great Successor.” Mr. Kim is in his late 20s, and he is in transition to becoming the youngest leader of a nation with a nuclear arms program. His uncle, Jang Song-taek, also appears to be playing a prominent role in the shaping of the new leadership.


The Yonhap news agency, based in South Korea, reported Thursday that Kim Jong-nam, the estranged eldest son of Kim Jong-il, had traveled in recent days to Beijing from his home in Macau and was now staying in the Chinese capital under the “protection” of senior officials. The son and father had a falling out after Kim Jong-nam was caught in 2001 trying to enter Japan on a fake passport to see Tokyo Disneyland.


Japan, South Korea and the United States are all looking to China to ensure that North Korea, a communist nation that has endured decades of isolation, remains stable during the transition. The Xinhua report on Mr. Noda’s visit indicates that stability, both inside North Korea and on the divided Korean Peninsula, is also the top priority for China, which is North Korea’s greatest ally and biggest trade partner.


Japanese news reports that appeared before Mr. Noda’s trip here said Mr. Noda would talk to Mr. Hu about restarting the six-party talks, which are aimed at getting North Korea to curb its nuclear program.


China began leading the six-party talks in August 2003. The other countries involved in the talks are Japan, North Korea, Russia, South Korea and the United States. North Korea withdrew from the talks in April 2009 and expelled all nuclear inspectors from the country. Now with the change of leadership in North Korea, questions have been raised about whether there is a chance the six-party talks might be revived.


China has often said that negotiations with North Korea are the way forward.


In 2010, China refused to comply with requests by the United States and South Korea to condemn North Korea following the sinking of the Cheonan, a South Korean warship that officials in Seoul and Washington said had been hit by a torpedo from a North Korean submarine. North Korea has denied any involvement. China also did not publicly criticize North Korea when it shelled Yeonpyeong Island in South Korea in late 2010.


But behind the scenes, Chinese officials worked to try to rein in the North Korean military, the most powerful interest group in the country, according to officials in Washington.