Brussels, 25/11/2009 (Agence Europe) - Before the EU-China Summit on 30 November and the meetings beforehand of those with responsibility for economic and monetary affairs in the euro area and their Chinese counterparts, BusinessEurope has expressed its concern over recent developments in euro exchange rates. The European employers' organisation notes that the single currency has risen in value by 13% against the US dollar and the Chinese currency, the Renminbi, since April. This would seem to be “inconsistent with the objective of an orderly resolution of global imbalances,” writes BusinessEurope President Jürgen Thumann in a letter to European Central Bank President Jean-Claude Trichet. Trichet will be in Nanjing with Eurogroup President Jean-Claude Juncker and Commissioner Joaquin Almunia on 28 and 29 November for low-key talks on the issue of exchange rates. “The euro cannot take the burden of adjustment on its own,” Thumann states, since “this not only creates a stumbling block for the recovery of Europe, but could also lead to sub-optimal monetary policy decisions across our different economic blocs”. BusinessEurope is, then, backing the message that he Europeans will take to the Chinese authorities, urging them to consider the appreciation of the Renminbi and bringing in greater flexibility in their currency system, along with increasing Chinese domestic demand.
A slight realignment of China's exchange rate policy is certainly possible, but it will be carried out as and when Beijing decides, and in a carefully controlled way. That is what Chinese Deputy Foreign Affairs Minister Zhang Zhijun said when he announced, “China will increase the flexibility of the Renminbi exchange rate at a controllable level in the future”. This flexibility will be “based on the market demand and with reference to a basket of currencies,” he stated, as other Chinese leaders had promised at the end of 2007 following a previous visit by the Juncker-Trichet-Almunia trio, speaking of “gradual, dynamic and reasonable” reform in which the market would have a greater role.
“At some point, the size of the Chinese economy will mean the yuan will have to be floated. But for the moment, the Chinese want to keep control over how it appreciates. It will take time, even though it is not inconceivable that a first step may come more quickly,” said Director General of the International Monetary Fund (IMF) Dominique Strauss-Kahn in an interview with the French daily Le Figaro published on Wednesday 25 November. “The IMF also feels that the euro is probably a bit strong, but it is very difficult to say for certain what currency values are,” he went on, stating that Europeans should “affirm their economic strategy better if they do not want China and the US to dominate the global debate over the next 20 years”. (A.B./transl.rt)