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China admits “controllable and gradual measures” rises in Yuan’s value

Monday, November 30th 2009 - 12:32 UTC
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EU and the US claim the Yuan is undervalued and demand action EU and the US claim the Yuan is undervalued and demand action

Chinese Premier Wen Jiabao said Monday a stable Yuan is good for both China and Europe and reiterated Beijing's policy of allowing only gradual and manageable rises in the currency's value.

“China will continue to follow its policy of proactive, controllable and gradual measures to allow the Yuan to rise on a reasonable basis,” Wen Jiabao said at a news conference after a summit between China and the European Union in the eastern Chinese city of Nanjing.

“There are some countries, on the one hand, demanding the Yuan's rise and, on the other hand, adopting protectionist measures. That is not fair” said the top Chinese official.

Wen Jiabao held talks with EU president and Luxembourg Prime Minister Jean Claude Juncker, European Central Bank chief Jean Claude Trichet and the EU Economic and Monetary Affairs Advisor Joaquin Almunica.

“China hopes all major currencies will maintain stability”, said the Chinese Premier adding that the stability of the Chinese currency “is an important contribution to world financial stability”.

European leaders want China to loosen controls on the Yuan that shelter Chinese exporters from the US currency’s slide and expose the Euro region to it. The Euro has surged about 20% versus the US currency since February 18, making exports less competitive and undermining the region’s recovery from the worst slump in six decades.

Both Trichet and Juncker indicated that no immediate change to China’s currency polices was likely. Chinese officials confirmed that they will continue to implement currency reforms begun in 2005, when a fixed exchange rate ended, Trichet said.

In the past six months, the Yuan has fallen 6.5% against the Euro. China has kept its currency at about 6.83 against the US dollar since July 2008.

The Yuan began gaining against major currencies following a set of exchange rate reforms introduced in July 2005, which appreciated the Chinese currency almost 20% against the US dollar, and for over a year now has remained in the range of 6.83 to the greenback.

“An orderly and gradual appreciation of the Yuan would be in the best interests of China and the European economy,” Juncker said. He added that the European Union and China had “not yet” reached an agreement on this “very difficult point of concern.”

Wen Jiabao told the visiting officials that a stable Yuan contributed to world financial stability and China would stick with a policy of gradually increasing the currency’s flexibility, Chinese state television reported. The Yuan will stay basically stable, Wen Jiabao reiterated, urging the same for major world reserve currencies.

The EU officials’ visit comes after US President Barack Obama left Beijing this month without a commitment to let the exchange rate strengthen. International pressure is growing on China after the Group of 20 nations, of which it is a member, agreed in September to make the world economy less reliant on Chinese savings and US demand.

Obama told the Chinese top leaders that the US expects progress on making the Yuan “more flexible” by mid- 2010, according to Jon Huntsman, US ambassador in Beijing. That’s when talks between the US State and Treasury secretaries and their Chinese counterparts will take place.

Categories: Economy, International.

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