Chinese PM Wen Jiabao: China Will Reform Exchange Rate Mechanism

By Peter Simpson

March 15, 2010

Chinese Premier Wen Jiabao says he will not be bullied into changing China's exchange rate. The Chinese leader warned the world economy could face a double-dip recession because of high unemployment and unstable currencies.

Speaking at a news conference Sunday at the end of China's annual parliament meeting, Chinese Premier Wen Jiabao said that his country would not yield to external pressure to revalue its currency.

He did promise to further reform China's exchange rate mechanism - but gave no indication when this might happen.

Instead, he said the value of the yuan - which is also called renminbi - will be kept "basically stable".

And he confidently stated the world's fastest growing economy would not be swayed by foreign claims China is giving its exporters an unfair price advantage.

Mr. Wen says he does not think the renminbi is undervalued, and says China opposes all countries engaging in what he described as mutual finger-pointing, or taking strong measures to force other nations to appreciate their currencies.

Mr. Wen said other nations should oppose what he claims is a rise in global protectionism, led by the United States and Europe.

Mr. Wen's comments are likely to frustrate China's major trading partners, who have urged Beijing to ease its strict currency policy.

They claim the Chinese government keeps the yuan undervalued to give the country's exporters an unfair price advantage and to boost its trade surplus.

Mr. Wen said Beijing's strict exchange rate regime has played an important role in steering the global economy out of the financial crisis.

He warned the world economy could face a double-dip recession because of high unemployment and unstable currencies.

Asked to defend China's reputation after the country was accused of arrogance during last year's Copenhagen Climate talks, the Chinese leader said he had been snubbed from a high level meeting, and the reasons why, he said, "remain a mystery."

He also launched a fresh salvo in the war of words with Washington, saying U.S. arms sales to Taiwan and President Obama's talks last month with the Dalai Lama - Tibet's exiled spiritual leader - had violated China's sovereignty.

He reiterated China's claim that Washington was to blame for the deterioration in Sino-U.S. relations.

And he said it was up to Washington to take "concrete steps" to patch up relations, adding a " peaceful U.S. - China relationship makes both countries winners."