Yuan stability vital, pressure 'unfair': Wen

CHINA (AFP) - Premier Wen Jiabao on Monday said international pressure over Chinas currency policy was unfair and that a stable yuan is crucial to his nations economic health. Following a summit here with top European Union leaders, Wen also rebuffed EU demands for a flexible policy and told journalists a stable yuan would be beneficial to the global economys recovery from the financial crisis. Wen said some countries are on the one hand pressuring China to appreciate its currency while on the other hand they are practising trade protectionism against China in many different forms. This is unfair. In fact these measures are restrictions on Chinas development. His comments came after meetings in the eastern Chinese city of Nanjing with top EU leaders who called for China to loosen its grip on the yuan. He did not specify which protectionist measures he was referring to but China has been targetted in a recent flurry of anti-dumping charges and other trade remedy actions by the United States and Europe. In the face of the unprecedented international financial crisis, to maintain the basic stability of the yuan exchange rate is conducive to Chinas economic growth and the world economic recovery, Wen said. We will continue to improve the yuan exchange rate ... mechanism and maintain the basic stability of the yuan at a reasonable and stable level, he said. Wen spoke at a joint address with Swedish Prime Minister Fredrik Reinfeldt, who holds the EU rotating presidency, and European Commission President Jose Manuel Barroso following a brief summit Monday morning. Top European economic and finance officials the day before called for a gradual and orderly appreciation of the yuan. Jean-Claude Trichet told reporters on Sunday after talks between EU officials and Wen that the Europeans encouraged Beijing to take a more flexible policy, adding it seems it would be appropriate. The yuans exchange rate is one of the thorniest trade issues between China and the European Union. When Beijing officials talk about keeping the yuan stable, it typically refers to maintaining its current value. The Chinese currency has been effectively pegged to the US dollar since mid-2008, and Europe fears the euros resultant rise against the yuan will hurt EU exports to China and slow the continents economic recovery. The EU is Chinas largest trading partner, accounting for a fifth of the Asian giants total exports. Following the Sunday finance talks, European Union Commissioner for Economic and Monetary Affairs Joaquin Almunia said the low value of the yuan against the euro had led to a situation with which we are not satisfied. He told reporters it is in the Chinese interests not to create conditions that can lead to protectionism. While Beijing could allow a short-term appreciation of the yuan, significant change is unlikely as China will not want to be seen bowing to outside pressure, said Glenn Maguire, chief Asia-Pacific economist at Societe Generale in Hong Kong. China is giving every indication that the policy of yuan stability is here to stay for the immediate time being, he said. At any given time, the year-on-year appreciation of the currency is not going to exceed more than 3 to 5 percent in any particular year.

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