For the second time in a few weeks, China rebuffed calls by a major trading partner for it to allow its currency to rise.
China rebuffs EU calls for yuan to rise
For the second time in a few weeks, China rebuffed calls by a major trading partner for it to allow its currency to rise. But Beijing did tell visiting EU leaders that it was prepared to co-operate on efforts to combat climate change.
The 27-member EU, which is China's biggest trading partner, and the US complain that China is manipulating its currency to gain an unfair trade advantage. Barack Obama, the US president, similarly failed to secure concessions on the currency during his visit in November. Addressing a press briefing yesterday with the European Commission president Jose Manuel Barroso and the Swedish prime minister Fredrik Reinfeldt, the Chinese premier Wen Jiabao said that calls on Beijing to push up the yuan's exchange rate were unfair, especially in the context of what he saw as protectionist measures by the West.
Mr Wen said that maintaining the basic stability of the yuan exchange rate, especially against the background of the economic crisis, was "critical" and had helped China's development, thus aiding the world economic recovery. "Now some countries on the one hand want the [yuan] to appreciate, but on the other hand engage in brazen trade protectionism against China," Mr Wen said after the talks in the eastern Chinese city of Nanjing, which amounted to the most significant dialogue between the two sides in two years.
"Faced with the present complex economic conditions, we must appropriately handle trade friction and not engage in trade protectionism. I hope the EU will relax its controls on high-technology exports to China," Mr Wen said. China is committed to allowing the value of the yuan to be set by the markets, but has not yet made some of the necessary reforms to allow the currency to trade freely, saying such measures could lead to instability in the financial system.
In the past six months, the yuan has fallen 6.5 per cent against the euro. China has effectively kept its currency at about 6.83 against the US dollar since July last year. Because of worries that a rising euro could stall recovery in the euro zone as the region tries to compete with exports from China, the EU leaders had hoped for a reversal in the euro's climb against the yuan. About 20 per cent of China's exports go to Europe, and the EU runs a large trade deficit with China.
In the run-up to the summit, the top financial officials of the 16 nations that use the euro made clear their dissatisfaction with controls on the Chinese currency. "We think an orderly and gradual appreciation of the [yuan] would be in the best interests of China and of the global economy," Jean-Claude Juncker, the prime minister of Luxembourg who also heads economic talks in the euro zone, said on Sunday.
The Chinese have also said they were not planning to stop their fiscal stimulus spending to help prime the economy and offset the impact of the credit crunch, and they urged the Europeans to act in similar fashion. "China and Europe must maintain the intensity of their economic stimulus and strengthen co-ordination and co-operation in macroeconomic policy and financial oversight, encouraging the recovery and sustainable development of the world economy," Mr Wen said.
China's economic growth is getting close to levels seen before the economic crisis pushed the government to adopt a 4 trillion yuan (Dh2.15tn) economic stimulus package. While China was not too forthcoming on the currency, it did have more positive news for the Europeans on efforts to combat the worsening global warming situation. Mr Wen said China was "solemn and serious" in its vow to cut the amount of carbon dioxide emitted per unit of economic output by 40 to 45 per cent by 2020 compared with 2005, and said that China placed "high importance" on global talks that will take place in Copenhagen from December 7-18, aimed at reaching a new climate change pact.
However, Mr Wen restated China's position that developed countries must lead the way in the talks by offering big cuts in carbon emissions. @Email:email@example.com