China warns EU it will not back down

 
City A.M. Reporter
CHINESE premier Wen Jiabao told the European Union (EU) yesterday to stop piling pressure on Beijing to revalue its currency, saying a rapid shift could unleash disastrous social turmoil.

Wen told an EU-China business forum in Brussels that China would implement a reform of its currency regime announced in June, making the exchange rate more flexible, but rebuffed calls from EU leaders for a rapid and substantial appreciation.

“Do not work to pressurise us on the renminbi rate,” the Premier said, departing from a prepared speech to a business forum on the sidelines of a summit with EU leaders.

Wen said EU leaders should turn to the US dollar for an explanation of the fluctuations in the exchange rate of the euro.

He said China's trade surplus against the United States was due to the specific structures of the two economies, not the yuan exchange rate.

He noted that a US congressman had predicted social unrest in China if there was a rapid rise in the currency, known as the renminbi or yuan.

“Many of our exporting companies would have to close down, migrant workers would have to return to their villages.

“If China saw social and economic turbulence, then it would be a disaster for the world,” Wen said.

The US and the EU accuse China of keeping its currency artificially weak to promote exports, undermining jobs and economic growth in the West.

The monetary standoff came amid growing signs of a “currency war” in which major industrial nations such as Japan and the United States are seeking to weaken their exchange rates while emerging economies such as Brazil and South Korea are taking or threatening measures to curb capital inflows.

The EU also pressed Beijing to amend its trade practices to put an end to technology theft, counterfeiting and export controls.