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Touchy Trade Relations

DW staff (sms)November 28, 2007

Chinese Premier Wen Jiabao on Wednesday, Nov. 28, rejected calls by EU leaders for faster revaluation of China's currency, saying its value was not a major factor in his country's growing trade surplus with Europe.

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Flags from the European Union and China
The EU and China disagree on which way the trade winds should be blowingImage: picture-alliance / dpa

Wen did, however, strike a more conciliatory tone with EU finance experts during the 10th China-EU business summit this week. He said that China would reform its currency policy in a "gradual, proactive and manageable manner."

But Wen added that the exchange rate between the euro and the Chinese yuan was determined by the euro's rate against the dollar.

"The plunge of the US dollar is the main cause of the appreciation of the euro," he said.

European and Chinese political leaders at a summit press conference
The EU wants China to move away from using the dollar as its only currency standardImage: AP

The EU's Economic Affairs Commissioner Joaquin Almunia said China, as a world economic power, needed to consider more than only the dollar in its economic policy.

"They have to consider that not all adjustments should be focusing on the relationship between the dollar and the yuan," Almunia told reporters in Beijing. "They must think about the evolution of the exchange rate toward the euro."

EU's growing trade deficit

Addressing the Europeans other main economic concern with the Asian giant, Chinese President Hu Jintao told European Commission President Jose Manuel Barroso that he "did not favor a sizeable trade surplus with the EU," officials said. The EU is China's largest export market.

European officials have called for China to speed up its reforms as the 27-member bloc's trade deficit with China reached a record 131 billion euros ($194 billion) last year and is expected to grow to 170 billion euros in 2007, according to EU statistics.

"The EU exports less to China than to Switzerland, a country of 7 million people," Barroso told a business forum on the sidelines of the annual summit. "Our ultimate goal is to create a level playing field for both sides."

Barroso also said EU businesses needed access "without artificial barriers," pointing to problems such as copyright violations, lack of standardization and murky investment rules. EU Trade Commissioner Peter Mandelson also called for more balanced trade with China.

Money to be made with climate technology

Four spinning windmills
Climate technology could get European business spinning in ChinaImage: picture-alliance/dpa

Wen promised to allow greater market access for EU firms "according to international rules," arguing that the EU could shrink its deficit by exporting more environmental protection technology to China.

"It is estimated that China will invest $300 billion, or 30 percent of the world's total, in energy conservation and environmental protection in the next five years," Wen said.

In a move that Barroso said would boost the European businesses' position in China, the European Investment Bank agreed Wednesday to lend 500 million euros to Chinese banks for projects related to climate change.

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