MercoPress. South Atlantic News Agency

China pledges to act on trade imbalances and the Yuan

Chinese Premier Wen Jiabao

Chinese Premier Wen Jiabao pledged Monday to resolve trade imbalances after the country's surplus hit a record high in October and work to let the Yuan move more freely.

"We stand for free trade and oppose protectionism", Wen Jiabao said in an address at the National University of Singapore. "We will speed up changing the mode of trade growth, improve the trade mix and strive to reduce trade imbalances". The Chinese leader's comments came after the country's trade surplus hit a monthly record of 27 billion US dollars in October and 212.4 billion in the ten months of 2007, prompting its global trade partners to urge China to open its market to foreign exports and to allow the Yuan to appreciate. Last year China's trade surplus was 177.5 billion US dollars and at the current rate this year would leap 59%. "We will continue to follow an independent, gradual and controllable approach in improving the Yuan exchange rate mechanism, increase its flexibility and gradually make the Yuan convertible under the capital account", promised Wen Jiabao. Currently, the Yuan is allowed during each trading session to move within a 0.5% band on either side of a reference rate against the US dollar set by the central bank early in the day. The people's Bank of China bank widened the band in May from 0.3%, a move seen at the time as an incremental step towards broader exchange rate reform. Wen Jiabao said China was fully committed to protecting intellectual property rights (IPR), another contentious and sensitive issue particularly with Washington, and was willing to work with its trading partners to improve the effectiveness of IPR protections. In a surprise admission the Chinese leader talked about the stock exchange "bubble" in China, which according to some Western analysts could burst and splash over to the whole economy. "To be honest, the Chinese market still stammers. We've done in ten years what it took capitalism a century", he said adding that China lacks such an experience. Last May the Federal Reserve former chairman Alan Greenspan and the OECD warned of the risks of the current stock euphoria in China. "We must teach our shareholders on the risks of the market and the fact that they can make a lot of money but also loose", said Wen Jiabao.