BEIJING - China increased the value of its currency yesterday for the first time in a decade, a gesture with modest economic effects but a greater political impact on relations with the country's biggest trading partner, the United States.
The 2.1 percent increase in the value of the yuan falls far short of what the Bush administration and many in Congress had wanted, in hopes of making a dent in America's substantial trade deficit with China, which last year reached $162 billion.
The revaluation will make Chinese imports to the United States a bit more expensive and make U.S. exports slightly more competitive with Chinese-made products. The real impact on trade will be insignificant, economists said, but as a political gesture, it comes as China hopes to win relief from U.S. textile quotas that have severely limited Chinese exports of cotton socks, shirts and other clothing items.
A low value for the yuan, critics have long argued, made already inexpensive Chinese exports artificially cheaper, unfairly contributing to China's rising dominance in world trade. The small revaluation won only guarded praise in Washington.
Alan Greenspan, chairman of the Federal Reserve, described the revaluation as a "good first step" in testimony before the Senate Banking Committee.
"It is smaller than we had hoped, but to paraphrase the Chinese philosophers, a trip of a thousand miles can well begin with the first baby step," said Sen. Charles E. Schumer, a New York Democrat who has been one of Capitol Hill's most vocal critics in pushing for a shift in China's currency. "After years of inaction, this step is welcome."
China may also hope its move has broader political implications beyond trade policy. It at least temporarily relieves months of mounting diplomatic tensions over one major issue just as China is engaging in another battle fraught with politics, the takeover attempt of U.S. oil company Unocal Corp. by one of China's state-owned oil companies, CNOOC Ltd.
The currency - which will rise in value to 8.11 yuan, from the previous 8.28 yuan to the dollar - is also as much an issue about China's domestic stability as it is about international politics. A sharp change in the value of the yuan, also known as the renminbi, was never likely, in part because central planners are leery of tinkering too much with an economy that is producing millions of badly needed jobs as the country continues its socially jarring transformation to a market economy.
