EU finance officials reject early Yuan floating

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Last updated at: (Beijing Time) Tuesday, September 16, 2003

EU finance officials reject early Yuan floating

European finance officials say any adjustments to China's fixed exchange rate should be handled with caution, rejecting US calls for an early free float of the yuan.

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European finance officials say any adjustments to China's fixed exchange rate should be handled with caution, rejecting US calls for an early free float of the yuan.

"A shift to a more favorable exchange regime needs to be very carefully planned," said Wim Duisenberg, president of the European Central Bank.

EU finance ministers discussed Asian exchange rates during a two-day meeting in Stresa, Italy, that wrapped up on Saturday.

The EU officials' talks came as American lawmakers were threatening tariffs on Chinese imports if Beijing did not take steps toward letting the yuan float freely on world markets.

European officials said a too abrupt change could trigger instability in international markets.

Managing Director of the International Monetary Fund Horst Kohler on Friday said that the institution will not exert pressure on China over its foreign exchange policy.

Kohler said he does not think the IMF should be part of a scenario of coordinated pressures on China to take decisions when they are not convinced whether it is in their interests or not.

The issue of Asian currencies and the trade imbalances blamed on their weakness is due to be discussed in international finance talks this week in Dubai, United Arab Emirates.

Italy, which holds the rotating EU presidency, on Saturday proposed to other EU nations a statement to be read at the Dubai meeting.

"Exchange rate regimes which are increasingly perceived as unsustainable, excessive current account imbalances and related changes in the levels of foreign currency reserves should be avoided," said the EU draft statement.

Duisenberg said the problem was not restricted to China. "Unfortunately, virtually all, if not all, the East Asian nations ... have in one way or another pegged their currency to the dollar."

Other Asian nations have backed China in rejecting US demands for fully floating the yuan.

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