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December 1, 2009

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Wen rejects EU calls for faster reform initiatives on currency

PREMIER Wen Jiabao yesterday rebuffed calls from European leaders for faster reform in China's currency policies.

The response by Wen followed a one-day summit with the 27-member European Union that ended with the signing of five mostly technical agreements on energy and environmental cooperation.

China's policy for the yuan, or renminbi, is what's best for the country's economy and the world economic recovery generally, the Chinese premier said.

His comments apparently rejected suggestions from the European side that allowing greater flexibility would help perk up domestic demand and allow China greater leeway on monetary policy.

"Some countries demand change while practicing trade protectionism against developing countries," Wen told reporters in Nanjing, in east China's Jiangsu Province, host city of the 12th China-EU Summit.

'Trade friction'

He said such views were aimed at stifling China's development.

"This is unfair," he said. "We will maintain the stability of the renminbi at a reasonable and balanced level.

The United States, in particular, has taken a number of steps recently to slow a surge in competitively priced imports from China in sectors including steel, tires and paper.

"Faced with the present complex economic conditions, we must appropriately handle trade friction and not engage in trade protectionism," Wen said.

"I hope the EU will relax its controls on high-tech exports to China, let enterprises on both sides do business in an unfettered way and fully unleash the industrial advantage of the EU."

The premier said that maintaining a stable yuan during the global financial crisis would not only benefit China's economic development, but also be conducive to world economic recovery.

"China will further improve the yuan exchange rate formation mechanism, acting on its own initiative and in a controllable and gradual manner, and keep the yuan exchange rates basically stable at a reasonable and balanced level," he said.

China had maintained the stability of the yuan, making an important contribution to global financial stability and economic development, Wen said when speaking with three Eurogroup leaders on Sunday.

The central parity rate of the yuan was 6.8272 to the US dollar yesterday, compared with 6.8269 on the previous trading day, according to the China Foreign Exchange Trading System.

The daily central parity rate for the yuan against US dollar is the weighted average of prices given by market makers, excluding the highest and lowest offers in the calculation.

The currency is allowed to float on the interbank market within a daily limit of 0.5 percent each way.

China unpegged the yuan from the US dollar in July 2005 and allowed it to fluctuate against a basket of currencies. It gained 21 percent before stabilizing against the dollar in the middle of 2008.


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