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China Digs In On Yuan, Holds Out Hand On Climate

China's Premier Wen Jiabao at a press conference during the 12th EU-China summit in Nanjing on November 30

China's Premier Wen Jiabao at a press conference during the 12th EU-China summit in Nanjing on November 30

NANJING, China (Reuters) -- China has pushed back against calls to let its currency rise, with Premier Wen Jiabao warning that lifting the yuan could hobble growth, while assuring Europe that his nation is serious about global warming.

Speaking to reporters after summit talks with the European Union, Wen said the demands being made of Beijing to push up the yuan's exchange rate were not fair.

He reaffirmed China's determination to take its own, gradual steps on the currency front but said that for now the yuan, also known as the renminbi, was being kept broadly steady.

"In this international financial crisis of a kind rarely seen in history, maintaining the basic stability of the renminbi exchange rate has benefited China's economic development and benefited world economic recovery," Wen said.

"Now some countries, on the one hand, want the renminbi to appreciate but, on the other hand, engage in brazen trade protectionism against China. This is unfair. In fact, it amounts to restricting China's development," he said.

The EU had promoted the summit as an affirmation of its global status. But Wen swatted away the bloc's complaints about his government's policy on the yuan.

His blunt words stiffened Beijing's defense of its exchange-rate stance. He not only defended that policy, but attacked critics as promoters of dangerous protectionism who were threatening global economic recovery.

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.

The contentious question of the yuan's exchange rate has dominated two days of talks with an array of high-ranking EU policymakers in this eastern Chinese city.

The EU is China's biggest market, taking 20 percent of its exports, and runs a big bilateral trade deficit with China.

Gradual Rise

The three top economic officials representing the 16 EU members that use the euro pleaded on November 29 for a renewed gradual rise in the yuan, which China has virtually pegged to around 6.83 per dollar since July 2008 to help its exporters weather the global credit crunch.

European Commission President Jose Manuel Barroso also pressed those demands on November 29, telling Wen that the low value of the yuan was hurting parts of the EU economy.

But in his remarks to reporters on November 30, Barroso did not mention the yuan, and he abruptly canceled another news conference about the EU-China summit.

A joint statement issued by the two sides was also silent on currency strains.

But Wen offered a softer hand on global warming, telling the EU that China would deliver on a promise to curb carbon dioxide output, the main greenhouse gas emitted by burning fossil fuels.

China's vow last week to cut "carbon intensity" -- the carbon dioxide released in generating each yuan of output -- by 40 to 45 percent by 2020, compared with 2005 levels, was an earnest pledge, Wen said.

But he also restated China's position that developed countries must lead the way in climate change talks starting next week in Copenhagen by offering big cuts in carbon emissions.

Advanced economies must also make financing and technology available to developing nations so they can tackle global warming, Wen added.

This demand was part of a common stance toward the Copenhagen talks that China forged at the weekend with India, Brazil and South Africa.

Swedish Prime Minister Fredrik Reinfeldt said countries were not aiming high enough in proposals to reduce carbon emissions, risking global warming that lifts average temperatures worldwide 2 degrees Celsius or more above the pre-industrial average.

"More needs to be done," Reinfeldt, whose government holds the rotating presidency of the 27-member EU, told the briefing.

Turning to the economy, Wen said it was too early to abandon the pro-growth policies adopted to counter the credit crunch.

"China and Europe must maintain the intensity of their economic stimulus and strengthen coordination and cooperation in macro-economic policy and financial oversight, encouraging the recovery and sustainable development of the world economy," the premier said.