European finance ministers endorsed China's policy of allowing its currency
to strengthen gradually and pledged not to pressure Beijing for a speedier
revaluation, Bloomberg reported on Sunday.
Luxembourg's Prime Minister Jean-Claude Juncker (L) talks with
China's Finance Minister Jin Renqing during an ASEM Finance Ministers'
meeting in Vienna April 9, 2006. Asian and European Finance Ministers met
to discuss issues concerning globalisation on Sunday.
[Reuters] |
"It's up to the Chinese to decide," said Dutch Finance Minister Gerrit Zalm
in an interview with Bloomberg at a meeting of economic policy makers from 38
European and Asian nations in Vienna, Austria. "Gradual is always better than
fast."
While European officials agreed with their US counterparts that the yuan is
somewhat weak, they said that pressuring Beijing for marked yuan change risked
backfiring. Europe's strategy reflects concern that a sudden jump in the yuan
value could boost the euro and undercut their exports that are driving European
growth, say analysts.
The yuan has appreciated a further 1.3 percent against the US dollar since
China's July 21 decision to replace a decade-long peg to the US dollar with a
basket of currencies and allow its exchange rate to rise 2.1 percent.
"We don't want to lecture publicly our Chinese and Asian friends. We don't
think that it makes sense to be too outspoken," Luxembourg Prime and Finance
Minister Jean-Claude Juncker said on Sunday. "We are happy with the monetary
decision China has taken, we think more could be done."
One of China's top currency regulators on Saturday rejected calls to let the
yuan strengthen too quickly, because it could bring destructive effects on
Chinese and world economy.
"In our foreign exchange reform, controllability is the most important
factor, and the ability for us to initiate the reform," Wei Benhua, deputy
director of the State Administration of Foreign Exchange, said in Vienna. "The
third most important thing is graduality."
However, the United States government has been calling for faster yuan
changes. "More needs to be done," US Treasury Secretary John Snow said "The
Chinese, while they're moving, are moving too cautiously."
Nevertheless, Austrian Finance Minister Karl-Heinz Grasser, who is chairing
the Vienna talks, said little would be achieved by bullying China.
"It's much better to have a discussion with colleagues to try and convince
what is necessary for the world economy, and not so much push from outside like
it was done in the past," he told reporters.
Exports are the main source of power for the dozen-nation euro-area economy,
with their share of gross domestic product rising to 41 percent today from 30
percent in 1991. European officials and economists worry a hasty shift in
China's yuan exchange rate could undermine foreign demand by roiling currency
markets, pushing the dollar down and the euro up.
An "abrupt" change in the yuan "might risk an excessive additional downward
movement of the dollar against the euro," the European Commission said in a
confidential planning document for this weekend's talks obtained by Bloomberg
News.
The US is the biggest market for the euro region. European exports of 184.8
billion euros ($223 billion) to the US last year dwarfed exports to China of
43.5 billion euros.
European governments have sought to whittle away at China's trade advantages,
made possible by China's low labor cost, by imposing tariffs or filing
complaints to the World Trade Organization. Last month the EU imposed
duties on some Chinese leather shoes, following last year's decision to set
limits on Chinese clothing imports.