EU urges flexibility from China over exchange rates

Finance ministers from the 13 nations sharing the euro agreed late Monday to dispatch a delegation of powerbrokers to China to raise their concerns about exchange rates face-to-face with Chinese authorities.

ECB president Jean-Claude Trichet, EU Economic Affairs Commissioner Joaquin Almunia and chairman of the Eurogroup of finance ministers Jean-Claude Juncker would make the trip “by the end of this year,” Juncker said.

European finance chiefs fear that China’s runaway current account surplus is contributing to a global mismatch in the flow of funds and goods between the major world economies, fuelling exchange rate volatility.

“China and other emerging economies should introduce more flexibility in their exchange rate management,” Almunia told reporters as European finance ministers gathered Tuesday in Luxembourg.

“This is good for China’s growth, to rebalance the growth, to increase internal demand and it is good for the reduction of global imbalances for everybody,” he added.

Eurozone finance ministers singled out China in preparations for talks next week with colleagues from the Group of Seven richest countries with a call for Beijing to adjust the value of the yuan.

“In emerging countries with large and growing current account surpluses, especially China, it is desirable that their effective exchange rates move so that necessary adjustments occur,” the ministers said in an agreed statement.

In Brussels, the ECB’s Trichet echoed the statement before the European Parliament, and vowed to engage China in a “dialogue” over exchange rates.

China is regularly criticized for artificially keeping down the value of its currency in order to make its exports cheaper on international markets, which also has the effect of lifting the value of the euro.

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