China Blames Dollar for Sharp Yuan Rise vs. Euro
The euro's rise against the yuan is largely a reflection of a sharp drop in the dollar, and the European Union should look to Washington to resolve the problem, Chinese Premier Wen Jiabao said on Wednesday.
He told a news conference after a China-EU summit that Beijing would continue to reform its currency regime along market lines with the aim of eventually making the yuan convertible for purely financial transactions.
EU officials expressed frustration at the summit over the yuan's 8 percent slide against the euro since July 2005, even though Beijing has let the tightly managed yuan rise 10 percent against the dollar over the same period.
EU officials warned Beijing that the bloc's billowing trade deficit with China was fuelling protectionism and said a rise in the yuan against the single European currency was part of the answer.
Wen acknowledged that the yuan had indeed fallen against the euro.
But he added: "I believe that the main cause of the rise of the euro is the big fall in the value of the U.S. dollar. So I suggest that this question is best put to the U.S. financial authorities."
China and the EU agreed at the one-day summit to schedule regular high-level talks to address a broad range of economic and financial issues square on, including the trade deficit.
"There is a clearly stated political commitment by the Chinese government...to address the deficit," EU Trade Commissioner Peter Mandelson told Reuters.
Brussels expects the 27-member EU's trade deficit with China to rise nearly 30 percent this year to 170 billion euros ($253 billion).
"Both sides understand the deficit is a problem," Jose Socrates, the prime minister of Portugal, which holds the rotating EU presidency, told the news conference.
The negotiating structure resembles the "strategic economic dialogue" between the United States and China, which brings together cabinet ministers from numerous departments every six months.
The panel would also address EU complaints about violations of intellectual property rights in China and barriers facing EU firms trying to enter China's market.
The first meeting of the EU-China body is scheduled to take place next March after a scheduled Chinese ministerial reshuffle.
"We have a consensus and desire to work to resolve this issue," Wen said of the deficit.