Chinese head backs a stable euro currency

 
City A.M. Reporter
CHINA pledged yesterday to support a stable euro and not reduce its holdings of European government bonds in an effort to deflect criticism of its foreign exchange policy ahead of an EU-China summit this week.

China, at loggerheads with the US over the yuan and likely to face similar complaints during his tour of European countries this week, emphasised its willingness to cooperate with the 27-nation EU.

“I have made clear that China supports a stable euro,” Chinese Premier Wen Jiabao said during a visit to Greece at the start of a one-week European tour. “We will not reduce the holdings of European bonds in our foreign exchange portfolio,” he added.

Wen, who offered on Saturday to buy Greek government bonds when debt-laden Athens resumes issuing, said he was glad Greece was starting to emerge from the shadows of its debt crisis.

China has said it needs to diversify its foreign currency holdings and has bought Spanish government bonds. Chinese state entities have been generally conservative about investing in foreign financial markets and the Chinese government faces domestic political criticism over losses they incurred during the global financial crisis.

Policy moves by the Chinese government to free the yuan from a dollar peg will help the Chinese currency rise, Dominique Strauss-Kahn, the head of the IMF said on Saturday.

Wen and his Greek counterpart George Papandreou said in a joint statement the world's nations need to coordinate economic policies for global recovery to find a sure footing.

“Global economic recovery is a journey with many turns and a full exit from it requires joint efforts,” Wen said. He made no comments on the yuan. On Saturday he said he was willing to work with the EU to confront the financial crisis and reform the international financial system.

Ahead of a China-EU summit on 6 October, Wen urged the block to recognise China as a market economy, a status that would make it less vulnerable to anti-dumping charges under WTO rules. In exchange, China offered to boost copyright protection and widen bilateral trade.