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China Premier: 'Trade Protectionism Will Only Slow the Pace of World Economic Recovery'

Wen said countries should be 'rational' in dealing with trade disputes as the world grapples with a mounting debt crisis.

China's Premier Wen Jiabao on Friday said rising protectionism is damaging the global economy, days after the U.S. Senate passed a bill aimed at punishing Beijing for alleged currency manipulation.

Wen made no specific mention of the United States, but his remarks followed a storm of protest in China over the bill, which Beijing has warned could start a trade war between the world's top two economies.

"What is worrying is that ... trade protectionism is rising sharply," Wen told exporters in a speech carried on state television. "Trade protectionism will only slow the pace of world economic recovery."

Wen said countries should be "rational" in dealing with trade disputes as the world grapples with a mounting debt crisis.

"The shadow of an international financial crisis could be removed as soon as possible ... only if we properly handle international trade friction in a more rational way," he said.

Wen was speaking at the opening of China's largest trade fair, held twice a year in the southern city of Guangzhou.

Some U.S. lawmakers and officials say China's currency is undervalued, giving the country an unfair trade advantage by making its exports cheaper.

Record Trade Deficit

Wen's comments came after the United States said its trade deficit with China rose to a record level of $29 billion in August, data that is likely to fuel allegations China keeps its currency artificially weak.

Many in Washington say that China keeps the yuan unfairly low against the dollar, giving its goods an edge of as much as 30% over similar U.S. products, widening the trade deficit and costing American jobs.

Leaders in the House of Representatives have signaled that they will block the currency bill, but anti-China sentiment is on the rise ahead of U.S. elections in November 2012.

Beijing has denounced the bill as a "ticking time bomb" that threatens to blow up trade ties between the economic superpowers.

China's overall trade surplus actually narrowed to $14.51 billion in September as exports slowed, hit by economic turmoil in the United States and Europe, according to official figures.

The country's exports rose 17.1% year-on-year to $169.7 billion, slowing from a 24.5% rise in August.

Worries over slowing overseas sales will prevent China from allowing its currency to appreciate more sharply, amid fears that this would hurt exports, which are a major driver of economic growth, analysts said.

China defends its exchange-rate policy, saying it is moving gradually to make the yuan currency more flexible.

The yuan has risen more than 7% against the dollar since mid-2010, when Beijing relaxed a de facto peg to the U.S. currency, imposed in 2008 to protect its exporters during the global financial crisis.

China also said that it asked the World Trade Organization to intervene in two separate trade disputes with the United States over shrimp and saw blades, which Washington accuses Chinese producers of dumping.

Beijing has asked the world trade body to set up a panel of experts to help address anti-dumping measures taken by the United States in the two cases, China's Ministry of Commerce said.

Copyright Agence France-Presse, 2011

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