Premier Wen urges EU not to pressure China on RMB appreciation

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Chinese Premier Wen Jiabao on Wednesday urged European political and business leaders not to join the "chorus" on pressuring China on the appreciation of the Renminbi, or RMB.

China's trade surplus was explained by the specific structures of the economies involved in international trade instead of the exchange rate of the RMB, Wen said at the Sixth China-EU Business Summit.

"The (past) appreciations of the RMB did not lead to any changes in the trend (of China recording trade surplus)," Wen said, referring to the fact that China continued to record trade surpluses after it initiated an exchange rate reform in 1994 although the RMB has appreciated by an accumulated 55 percent since then.

China also continued to record trade surpluses against the United States after it initiated a second exchange rate reform in 2005 to allow the RMB to appreciate 22 percent against the U.S. dollar since then, Wen said.

"The trade issue should not be politicized. It is an issue of the (trade) structure," the premier said.

Chinese enterprises were still mostly at the lower end of the global industry chain. China has a surplus in commodity trade but deficits in the trade of services. It has surpluses against the United States and the European Union but deficits against South Korea, Japan and the Association of Southeast Asian Nations (ASEAN), Wen said.

"We are never in pursuit of trade surplus. We are in pursuit of balanced and sustainable trade," Wen said.

European leaders should turn to the U.S. dollar for an explanation of the recent fluctuations in the exchange rate of the euro, he added.

The world will by no means benefit from an appreciation of the RMB by 20 percent to 40 percent -- as the U.S. has demanded -- because it will damage the Chinese economy, and the Chinese economy contributed about 50 percent of the global economic growth last year, Wen said.

"Once again, I would make it clear to our friends from the business community, out of frankness and friendliness, don't pressure China on RMB appreciation," Wen said. "We will stick fast to the exchange rate reform. We will gradually allow more flexibility in RMB exchange rate."

Wen assured European investors of a good investment environment in China, saying China would stick to its reform and opening up policies.

The only change would be a more standardized and orderly administration over foreign investment and the investment environment in China, Wen said.

Foreign businesses operating in China will enjoy the same national treatment as Chinese enterprises do on issues related to intellectual property, independent innovation, and government procurement, he said.

Wen, a trained geologist, said China pursues sustainability in rare earth mining.

"What we pursue is to satisfy not only the domestic demand but also the global demand of rare earth. We should not only stand from the present, but should also look forward to the future," Wen said.

There used to be an abusive exploitation of the reserves in China. What China will do is to regulate the industry, not to close it, Wen said.

"If the rare earth minerals were used up, how would the world and China deal with the problem?" he said.

Wen's visit to Brussels is part of a four-nation tour that first took him to Greece. He will also visit Italy and Turkey.

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