BEIJING // China looks set to resist pressure to allow the yuan to appreciate substantially, with the country's premier saying yesterday the currency's stability had promoted global recovery. Speaking as China's National People's Congress parliamentary session ended, Wen Jiabao rejected suggestions by the US that the yuan's value was artificially low to boost exports.
American politicians have said the yuan, held at about 6.8 to the dollar since mid-2008, was as much as 40 per cent below its real value, giving Chinese exporters a significant advantage but harming western manufacturers. Mr Wen insisted this was not the case. "I don't think the renminbi is undervalued," he said, using an alternative term for the yuan. "We oppose all countries engaging in mutual finger pointing or taking strong measures and even forcing a country to appreciate its currency, because that won't help renminbi exchange-rate reform."
A stable yuan had "played an important role" in worldwide economic recovery. He said China planned to keep its currency "basically stable". Mr Wen called on the US to protect China's dollar assets, saying he was "still worried" about the country's currency holdings and urged Washington to "take concrete steps to reassure investors". Pressure to depeg the yuan from the dollar has increased in recent days after China's export figures for last month showed a 45.7 per cent jump compared with February last year. But imports also rose substantially, leading to a 51 per cent drop in China's trade surplus so far this year.
Paul Krugman, a Nobel Prize-winning economist and professor at Princetown University, said earlier this month that China's currency policies were stifling global economic recovery. Mr Krugman said the US Treasury department would find it "really, really hard" to avoid calling China a currency manipulator in a report due out next month, something that would spark measures to pressure China to revalue the yuan.
Calls have also come from Washington for action to be taken over China's alleged currency manipulation, which is said to have cost hundreds of thousands of American jobs. Legislators have warned that high tariffs could be imposed on Chinese goods if Beijing does not allow the value of the yuan to rise. Wall Street economists have suggested that if the US took unilateral action against China, other nations would follow suit. But China-based analysts have suggested that if the yuan is allowed to appreciate later this year, it will be by only a few per cent.
Last week, Ren Xianfang, a China analyst at IHS Global Insight in Beijing, predicted a "small and incremental" revaluation of the Chinese currency. Chinese exporters were expected to face a tougher climate later in the year, Ms Ren said, making it likely Beijing would resist external pressures for significant revaluation. Mr Wen's words tie in with comments made a week ago by Zhou Xiaochuan, the governor of China's central bank, that an uncertain global economic outlook made the country "very cautious" about revaluing the yuan. However, Mr Zhou also described the peg to the dollar as a "special measure" that would "sooner or later" be dropped.
For decades China linked the value of the yuan to the US dollar. In 2005 the link was broken, only to be reinstated in July 2008, by which time the value of the yuan had appreciated 20 per cent against the dollar. Wider US-China relations were also discussed by Mr Wen yesterday after tension between Washington and Beijing over a recent US arms sale to Taiwan, which China claims as its own, and the White House meeting last month between Barack Obama, the US president, and the Dalai Lama.
"The responsibility for the serious disruption in US-China ties does not lie with the Chinese side, but with the US," Mr Wen said. * with Bloomberg firstname.lastname@example.org