Tuesday October 5, 2010EU urges faster yuan rise
BRUSSELS - Euro area policymakers pressed China on Tuesday for a faster appreciation of its currency to help rebalance the world economy but said Chinese Prime Minister Wen Jiabao had differed with them.
The chairman of euro zone finance ministers, Jean-Claude Juncker, told a news conference after talks with Wen on the sidelines of an EU-Asia summit in Brussels: "China's real effective exchange rate remains undervalued."
He said the 16-nation European currency area had urged an "orderly, significant and broad-based appreciation" of the yuan.
Asked how Wen had responded, Juncker said the message came as no surprise to the Chinese delegation, but added in French: "The Chinese authorities do not share our view."
The United States and the European Union accuse China of keeping the yuan artificially low to boost exports, undermining jobs and competitiveness in Western economies.
The 48-nation Asia-Europe summit ended with agreement to consolidate a fragile economic recovery and ensure that reform of the International Monetary Fund gives more power to the emerging economies of Asia and other continents.
"This process needs to take into account the realities of today's world economy -- the shifts that have been taking place, and the strong growth in dynamic emerging markets and in developing economies," EU President Herman van Rompuy said.
The EU offered last week to give up two of the eight seats its members hold on the 24-member IMF board, to make room for emerging nations, but analysts called the gesture insufficient. The United States wants the board cut back to 20 seats, with fewer Europeans. The issue is set to go to a Group of 20 major economies summit in Seoul next month.
Wen did not attend the news conference after the monetary talks. However, he had told the opening summit session on Monday that China's objective was to ensure relative stability of the major reserve currencies.
However, after President Nicolas Sarkozy met Wen later on the sidelines of the summit, a French source said China seemed ready to discuss how to avoid "erratic" exchange rate variations.
"CURRENCY WAR?"
The annual EU-China monetary dialogue came amid fears of a global "currency war" as key trading powers, such as the United States and Japan, seek to weaken their currencies while emerging economies such as Brazil and South Korea raise or threaten tougher controls to limit capital flows.
Europeans are worried that they will be saddled with an overvalued currency, stifling their recovery, because they have few tools to contain the euro's rise, even if they wanted to.
France, which takes over the presidency of the Group of 20 major economic powers next month, has put reforming the international monetary system at the top of its agenda, hoping to draw China into multilateral talks on currency coordination.
"It is not appropriate at this point in time that China is never involved in discussions about currencies," French Finance Minister Christine Lagarde told a forum in Moscow on Tuesday.
AFP
