Euro zone not counting on quick response to yuan call
Written on November 30, 2009
The euro zone’s top economic officials pressed China on Sunday to let the yuan resume its gradual rise but said they were not counting on immediate results.
“I can’t say that I’m more optimistic than I was before I came here,” Luxembourg Prime Minister Jean-Claude Juncker, who chairs the 16-nation Eurogroup of euro zone finance ministers, told a news conference in the eastern Chinese city of Nanjing.
Speaking after a day of talks with senior officials including Premier Wen Jiabao, he said it was tough to justify the yuan’s recent depreciation against a basket of currencies in light of China’s fast economic growth and bulging external surpluses.
“People think an orderly and gradual appreciation of the renminbi would in the best interest of China and in the best interest of the global economy,” Juncker said.
Striking a conciliatory tone, he said he understood why China had halted the appreciation of its currency, also known as the renminbi, during the global credit crunch.
The yuan rose 21 percent in all against the dollar in the three years after Beijing ended a peg to the U.S. currency in July 2005 and said it would let the yuan float in a managed band with reference to a basket of currencies.
Last July, however, China effectively repegged the exchange rate around 6.83 per dollar to help its beleaguered exporters.
“We are not advocating an immediate, short-term-oriented, dramatic change in Chinese monetary policy, but, as I said, an orderly and gradual appreciation of the renminbi,” Juncker said.
“WE WILL SEE”
The Chinese central bank caused a stir this month by dropping from its quarterly monetary report a stock reference to keeping the yuan’s exchange rate at a reasonable and balanced level.
Some economists thought Beijing was flagging a shift in policy, and European Central Bank Governor Jean-Claude Trichet said Chinese officials had promised to keep implementing the currency reforms launched in 2005.
“But I would not interpret that it means immediate changes. It is again the decision of Chinese authorities and I will not over-interpret,” Trichet said. “It is their decision, and we will see.”
Despite the caution, Joaquin Almunia, the EU’s commissioner for economic and monetary affairs, said Chinese officials had disclosed that a stronger yuan would be part of their strategy for eventually unwinding pro-growth policies adopted a year ago.
“One of the elements of this exit strategy, according to our Chinese friends, is to resume the regime for the exchange rate of the renminbi that was agreed in July 2005,” Almunia said.
Sunday’s meetings, a repeat of a 2007 mission, took place on the eve of a regular summit between China and the 27-member EU.
Filed in: legal.