China to let yuan rise 5% in 2011: Report

China will let the yuan rise about 5% against the dollar in 2011 as it needs a stronger currency to combat inflation and avert asset bubbles, an official newspaper said on Wednesday.

But a commerce ministry official warned that any appreciation would do little to narrow China's trade surplus with the United States, a constant irritant in the relationship between the world's two largest economies. The yuan's gains would be particularly strong in the first half of this year, the China Securities Journal said in a front-page editorial. "Yuan appreciation will make imports cheaper to reduce the impact of rising commodity prices in the international market, providing relief from inflationary pressure," it said. The Chinese-language newspaper is a leading voice on domestic economic affairs. Although its views do not represent official policy, they do shed light on the thinking in Beijing. Investors expect the yuan to rise about 3%  in a year's time, according to pricing in offshore forwards markets. But China-based traders expect the yuan to appreciate about 2% in the first quarter of 2011 alone, partly propelled by President Hu Jintao's visit to the United States in mid-January. While the central government generally tries to paint a picture that it resists US pressure for yuan appreciation, in reality it has often allowed it strengthen ahead of major political events, in recognition of the importance of bilateral ties. Trade surplus However, Vice Commerce Minister Jiang Yaoping said appreciation would have limited impact on reducing China's trade surplus with the United States. Jiang noted that much of the imbalance was explained by the processing trade in which multinational companies import intermediate goods and assemble them as finished products in China before exporting them to the United States. "We have adjusted the yuan's exchange rate since 2005, but we can see that China's trade surplus with the United States, especially the surplus in the processing trade, basically did not change," he told a forum on Wednesday. "That is to say, the yuan's exchange rate has no big impact on the trade surplus." US President Barack Obama's national security adviser pressed for efforts to reduce US-China trade imbalances in talks on Tuesday with China's foreign minister. Obama, who joined the meeting with Chinese Foreign Minister Yang Jiechi, reaffirmed a commitment to improve global cooperation with Beijing as he prepared to host President Hu on a state visit to Washington on January 19, the White House said.While Beijing and Washington are likely to use the summit to cast their relationship in a positive light, strains over China's currency and trade practices are expected to loom large. US national security adviser Tom Donilon "stressed the importance of effective efforts to reduce imbalances in both the global economy as well as in US-China trade", the White House said in a summary of Tuesday's wide-ranging talks. US complaints that China keeps the yuan too cheap, giving it an unfair trade advantage, are likely to feature in the meeting between Obama and Hu. The US trade deficit with China rose 20% in the first 10 months of 2010 and could top USD 270 billion for the year.