China Warns Exporters Still at Risk

April 27, 2010
China insists a strong yuan is needed to protect jobs and prevent social unrest, and says the value of the currency is not to blame for China's wide trade surpluses.

Due to uncertainties in the global economy, China on April 27 warned that its exporters were still at risk despite repeated complaints from abroad that a strong yuan gives them an unfair advantage.

China's major trade partners, led by the United States and the European Union, have stepped up pressure on Beijing to allow its currency to rise, saying such a move would help diminish global trade imbalances.

But leaders in the world's third-largest economy insist a strong yuan is needed to protect jobs and prevent social unrest, and say the value of the currency is not to blame for China's wide trade surpluses.

"China's foreign trade development still faces a lot of uncertainties due to... the twists and turns in the world's economic recovery," the commerce ministry said in its spring report on foreign trade.

"Companies are facing increasing foreign exchange risks due to the frequent changes in the value of the world's major currencies," it said.

The ministry also charged that trade protectionism was "getting worse in some countries and regions" -- without naming names -- and described tensions with other countries over trade issues as "more severe."

Chinese exports are one of the key growth drivers of the booming economy, but the ministry said they could falter due to other factors such as rising sovereign debt risks and increasing commodity prices.

U.S. lawmakers have been pushing for China to be labeled a "currency manipulator" -- opening the door to possible sanctions, but the U.S .Treasury has so far not complied, delaying the release of a report on the issue.

European Union Trade Commissioner Karel De Gucht told reporters in Beijing on April 27 that an increase in the value of the yuan -- which since mid-2008 has been effectively pegged at 6.8 to the dollar -- would help both sides.

Speculation has mounted in recent weeks about possible Chinese action to alter the exchange rate policy, but the commerce ministry made no mention of any moves in its report.

In an apparent gesture aimed at appeasing foreign discontent, the ministry pledged China would "maintain its policies to encourage imports and boost the purchase of energy resources, technology, equipment" and other goods this year.

Copyright Agence France-Presse, 2010

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