New York, May 19:

China was last night seeking to head off a looming trade war with the US after it announced a hatrick of measures designed to slow down the world’s fastest growing developing economy.

Beijing raised interest rates, tightened controls on credit and widened the band in which the yuan can trade against the dollar in a move carefully designed to coincide with two international gatherings over the coming days. Analysts said China had acted to defuse tension ahead of today’s meeting of G8 finance ministers in Potsdam and next week’s Strategic Economic Development talks between US treasury secretary Henry Paulson and a Chinese delegation led by vice-premier Wu Li in Washington.

America’s burgeoning trade deficit with China has fuelled demands for the Bush administration to sanction import tariffs amid claims that Beijing has deliberately held down the value of the yuan to make life easier for Chinese exporters.

Ashraf Laidi, chief foreign exchange economist with CMC Markets in New York said the concessions by Beijing were unlikely to be enough. The US has been demanding an appreciation in the value of the yuan but yesterday’s move merely widened the band in which the Chinese currency can fluctuate — up or down — from 0.3 per cent to 0.5 per cent. Beijing admitted that the changeswere unlikely to lead to a substantial appreciation of the currency. “The announcement is unlikely to prevent Congress from resurrecting its threats to impose import tariffs,” Laidi said.

Daniel Katzive, senior currency strategist at UBS, said, “While this may be an effort by the Chinese authorities to signal their willingness to allow more yuan appreciation ahead of next week’s US-China dialogues in Washington, the fact is that the previous 0.3 per cent band was not even being fully utilised, and today’s move will not necessarily result in a firmer yuan.”