Chinese Premier Disapproves of US Call to Revalue Yuan

Wen Jiabao responded to Obama’s call to revalue the Yuan’s exchange rate by saying that he doesn’t think that the Chinese currency is currently undervalued and there is no need to make any changes with regards to it. Wen’s statement comes in response to Obama’s comments on Mar 11, when he urged China to adopt market driven exchange rates.

China has set its currency at a stable rate since July 2008 and has said that it will reconsider changing that only at an appropriate time. Wen made it clear that coercion from US or European countries is clearly not welcome in this regard.

On the other hand, Wen urged US to protect its investors against the depreciating dollar, which has lead to drop in the value of Treasury securities held by China for a second month in a row. He said that the US should take concrete steps to safeguard the dollar assets of investors.

Noted economist Paul Krugman had earlier commented on China’s policy of protecting Yuan from market fluctuations saying that it is adversely affecting world economics and has curtailed global growth. He believes that the economic recovery would have been faster had China not undervalued its currency against dollar.

But Wen expressed disagreement with this notion saying that on the contrary, stable Yuan has actually had a positive effect on the world economy and has helped in the overall economic recovery.

US – China relations have been strained for a while now with Obama meeting Dalai Lama earlier this year and the recent sale of American arms to Taiwan. Adding to the tension is the latest demand in US for trade measures to force Yuan appreciation. Wen also said that he hoped that the US would not resort to trade protectionism and would respect free trade across borders.

On a different note, Wen also said that China is committed to opening up the nation to global businesses, and will welcome foreign businesses to set up operations as per Chinese laws. However, the statement comes in stark contrast to the recent turn of events with regards to the imminent closure of Google’s operations in China. Google has for sometime now been facing issues with China’s censorship and has also been troubled with cyber attacks on its network.

China seems to be talking double standards when it comes to free economy and trade. On one hand, it has been artificially holding Yuan steady against dollar, while on the other it is preaching free trade practices to the US.

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