Government and Policy

Wen stands firm on yuan

By Wu Jiao and Xin Zhiming (China Daily)
Updated: 2010-03-15 06:44

Premier Wen Jiabao meets the press on Sunday at the Great Hall of the People after the conclusion of the annual session of the National People’s Congress, the country’s top legislature. He answered questions ranging from the yuan’s exchange rate and the economic stimulus package to the country’s international role.[Wu Zhiyi/China Daily]

Premier rebuffs calls by Western nations on currency revaluation, says stable rate has helped global recovery

BEIJING: Premier Wen Jiabao brushed aside external calls for the yuan's appreciation on Sunday, saying they are "unhelpful", and stressed that the Chinese currency is not undervalued.

"We oppose the practice of mutual recriminations. External pressure is not helpful for yuan exchange rate reform," he told more than 800 Chinese and foreign reporters at a news conference to mark the conclusion of the 10-day annual session of the National People's Congress, the top legislature.

"China will stick to implementing a managed, market-based and floating exchange rate regime. We will keep the yuan basically stable at a reasonable level."

He made the remarks amid the backdrop of rising pressure for the revaluation of the renminbi.

Wen suggested that calls from the US and other countries for China to raise the value of the yuan are trade protectionism.

"I can understand some countries' desire to raise exports, but what I do not understand is depreciating one's own currency and attempting to pressure others to appreciate, for the purpose of increasing exports. In my view, that is protectionism," he said.

Wen said China's efforts at keeping the yuan stable have contributed to the global economic recovery.

"Since the outbreak of the international financial crisis, we have made strong efforts to keep the renminbi exchange rate at a stable level," Wen said. "This has played an important role in facilitating the global economy."

Zhao Xijun, finance professor at Renmin University of China, said "the message is very clear: The yuan will be 'basically stable', and any change in the yuan's value would hinge on China's economic conditions, not foreign pressure".

The United States, the European Union and others have long been critical of China's currency rate regime. Many US lawmakers complain China's currency is undervalued by as much as 40 percent, undercutting the competitiveness of US products.

Wen rebutted the US claim that the "undervalued" yuan is behind its trade deficit with China, and said the yuan is not undervalued.

Last year, he said, the EU saw exports drop by 20.3 percent overall, but exports to China declined by only 15.3 percent. Germany, meanwhile, saw exports to China peak at 76 billion euros ($104.6 billion).

The US' exports slumped by 17 percent last year, but exports to China dropped by only 0.22 percent, he said.

Analysts said the US has kept interest rates low for many years while continually injecting liquidity into the financial system to keep the dollar weak and benefit its exports. But the resulting high cost and low competitiveness in manufacturing, together with strong spending and a low savings rate, have failed to improve its international balance of payments.

Meanwhile, Washington has curbed exports of high-tech products to countries such as China, further worsening its trade balance. "I sincerely hope the US loosens exports of high-tech products to China," Wen said.

Wen also expressed Beijing's concerns about the safety of its holdings of US treasury bonds, as he did at last year's news conference

"Any fluctuation in the value of the US currency is a big concern for us," Wen said. "We cannot afford any mistake, how slight it is, when running our financial assets."

Wen said he hoped that the US will take concrete measures to ensure the assets are safe, as the safety of US treasury bonds are guaranteed by its national credibility.

According to the US Treasury Department, China held $894.8 billion in treasury bonds at the end of last year. This figure, revised up from the previous $755.4 billion, means China remains the largest overseas holder.

Sino-US relations

Beijing and Washington have also been at odds recently over the $6.4 billion US arms sales to Taiwan, and US President Barack Obama meeting the Dalai Lama.

Despite the recent visit by US Deputy Secretary of State James Steinberg, Wen gave no indication of a thaw in bilateral relations.

"The responsibility for the serious disruption in US-China ties does not lie with China, but with the US," Wen said.

"With mutual trust both countries can forge ahead, but with mutual suspicion both countries will fall behind," Wen said.

Fu Mengzi, a senior researcher on American studies at China Institutes of Contemporary International Relations, said it's high time the US reviewed its Taiwan policy and started reducing arms sales to the island.

Beijing and Washington increasingly need each other to handle global issues but the US must respect China's core interests, Fu said.

In response to a question on China taking on more responsibilities on the international stage, Wen said that China is still at the initial stage of development.

While China will not shy away from international responsibilities, the premier said the cornerstone of Beijing's diplomacy is to safeguard national interests, such as sovereignty and territorial integrity. "The stance has never changed whether China is strong or not".

Tao Wenzhao, an expert on US studies at the Chinese Academy of Social Sciences, said that the remarks show that Chinese leaders are clear-minded about the country's development and international role.

"China still have an arduous and long road to travel and it definitely needs a favorable international environment," Tao said.

Reuters and ap contributed to the story