Chinese Premier: Yuan Exchange Rate 'Close to Reaching an Equilibrium Level'

Beijing has repeatedly vowed to loosen its grip on the yuan but has rejected calls for a faster appreciation for fear of hurting its vast manufacturing sector, a key driver of the world's second-largest economy.

China's premier said the yuan is close to reaching a balanced level and vowed to improve the flexibility of the unit, despite persistent international criticism of Beijing's currency controls.

Wen Jiabao's remarks during a news conference at the end of the annual session of parliament came amid growing trade friction between China and its major trade partners, the United States and Europe.

"The renminbi exchange rate is close to reaching an equilibrium level," Wen told reporters, referring to the official name for the currency.

"We will press ahead with reforms of the renminbi exchange rate mechanism" such as improving the flexibility of the currency, he added.

The United States, Europe and other trade partners have long-criticized China over its exchange-rate policy, which they say makes the currency artificially cheap, giving Chinese exporters an unfair trade advantage.

Beijing has repeatedly vowed to loosen its grip on the yuan but has rejected calls for a faster appreciation for fear of hurting its vast manufacturing sector, a key driver of the world's second-largest economy.

Wen said the yuan has appreciated about 30% since 2005 when Beijing began reforms but the government would push for "greater elasticity."

However, he noted that in the face of global economic turmoil, it is crucial for China to "run our own affairs well."

The value of yuan has been a constant thorn in the side of China-U.S. relations, with Washington blaming Beijing's currency controls for creating huge international trade imbalances.

But Wen said China's international balance of payments is "approaching basic equilibrium," with the current account surplus below 3% of gross domestic product last year.

He added that the best way to resolve the "difficulties and frictions" between the world's two largest economies is to "enhance cooperation" and boost "two-way trade."

In a package of proposals submitted to President Obama, Wen said he has called for greater "business, financial and investment cooperation" and urged Washington to "ease restrictions" on Chinese exports.

"The Chinese side is prepared to buy more from the United States and the United States needs to ease restrictions on related exports of goods to China," Wen said, without saying when he sent the proposals.

"We believe that cooperation between China and the United States is always better than confrontation."

Copyright Agence France-Presse, 2012

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