Sarkozy Turns Up Pressure on China Over Yuan

French President Nicolas Sarkozy on Monday called publicly on Chinese President Hu Jintao to let the yuan rise more swiftly against the euro.


Speaking at a joint news conference, Sarkozy said China had growing global responsibilities on issues such as the environment and, particularly, on economic and currency matters.

"We need to arrive at currency rates that are harmonious and fair," Sarkozy said, adding that China should "accelerate the appreciation of the yuan against the euro".

The French president also said China had agreed to buy 160 Airbus aircraft. The two sides earlier announced a framework purchase agreement but did not disclose how many planes China would buy.

China, which tends to share orders between Airbus and Boeing, needs thousands of aircraft in coming decades to keep pace with air travel in the world's fastest-growing major economy.

Sarkozy was speaking on the second day of a three-day visit to China overshadowed by mounting concern in Europe about the impact on exports from the surging euro , which hit a record high against the U.S. dollar last week.

Trade Surplus

Sarkozy, who earlier dined with President Hu Jintao, has been vocal in demanding that Beijing let the yuan rise more swiftly to help cap the country's billowing trade surplus with the European Union.

"China therefore has an important role to play in cooperation with the other players in order to prevent the imbalances accumulating to the point at which we no longer know how to get out of them," he said.

Finance Minister Christine Lagarde, who is traveling with Sarkozy, declined to say when that time would come. "His point was that before we reach the point of creating damage, we need to sit down and talk," she said.

Beijing says it cannot do much on exports until its internal consumption rises to pick up the slack. China analysts say there are fears of social unrest without the export wheels turning.

The issue provoked the only significant difference between Sarkozy and Hu during Sunday's dinner conversation, but China left the door open to discussion, a French official said.

Strong Differences Over Yuan

"The only point at which there were strong differences was over the yuan. Basically President Hu said he understood the problem but that it was not simple for China. It wasn't a rejection; we just need to keep working on it," the official said.

Sarkozy will overlap in Beijing with a high-powered European Union delegation, including European Central Bank President Jean-Claude Trichet, which is expected to tell Beijing that it needs to let the yuan climb to cool its economy and Damp down inflation.

Jean-Claude Juncker, the chairman of the Eurogroup of finance ministers, said last week that the yuan was now undervalued by 20 to 25 percent, handing China an unfair trade advantage.

While the Chinese currency has climbed 9 percent against the dollar since its landmark 2.1 percent revaluation in July 2005, it has fallen about 11 percent in total against the euro.

Sarkozy said he would have the same message for China's leaders that he had for U.S. President George W. Bush earlier this month: "As far as I am concerned, a great country should have a strong currency."

Business Deals

Hu and Sarkozy will witness the signing on Monday of a string of contracts that could be worth $20 billion.

China is due to order two modern nuclear power reactors from state-owned Areva.

Sarkozy arrived in Beijing from Xian, the former imperial capital, where he viewed the Terracotta Army -- the 6,000 preserved figures of warriors and horses defending the necropolis of China's first emperor.

He was escorted into the earth trenches for an up-close tour, walking up and down the battle lines of life-size baked-clay soldiers.

Sarkozy will hold talks with Prime Minister Wen Jiabao and take a glance at Beijing's 2008 Olympics preparations before stopping off in Shanghai on Tuesday on his way home to Paris.

By starting his journey in Xian in western China, however, Sarkozy appeared to send a reassuring diplomatic signal to his hosts that he is conscious of China's sense of history and its centuries-old culture.

The trip was also stage-managed to demonstrate a page has turned in French politics, beginning at the exact spot where Sarkozy's predecessor and rival, Jacques Chirac, left off at the end of his 2006 visit.