Vienna, April 9:

European Union and Asian officials said today they wo-uld like to see China’s curre-ncy become more flexible b-ut stepped back from dema-nding Beijing revalue ‘yuan’.

China’s low exchange rate has helped it boost a huge and growing trade deficit with both the United States and the EU. US officials have urged China to revalue its currency, saying the yuan is undervalued by up to 40 per cent and gives an unfair advantage to China’s manufacturers at the expense of American competitors.

In a statement at the end of two days of talks, EU and Asian finance ministers did not mention exchange rates although they stressed the need to cut global imbalances to ensure ‘stable and sustainable conditions’ for world economic growth.

Asian Development Bank president Haruhiko Kuroda said that, in his personal view, only a gradual currency adjustment would suit a country like China which is still moving from a state-controlled economy. “If you maintain too long an exch-ange rate which does not reflect economic fundamentals, that could create problems. I still think that a more flexible yuan would be in the interests of Chinese economy.” Austrian finance minister Karl-Heinz Grasser — who led the talks — said both the EU and the US expected to see more flexibility on important Asian currencies.

“I think that a more gradual flexibility of the yuan would be a good thing to have in order to also try to work on the reduction of the global imbalances,” he said. Kuroda said China’s foreign exchange reserves increased by more than $200 billion last year, thanks largely to state intervention in the exchange market. “China still maintains capital controls and intervenes in the market significantly,” he said.

The EU’s largest trade deficit by far is with China, hitting $128 billion last year, up a third on 2004. The US trade surplus with China is even larger and hit a record $202 billion last year. EU Economic and Monetary Affairs Commissioner Joaquin Almunia said every major player in the global economy had work to do to cut what ministers termed ‘persistently large global imbalances’.

Talks on auto parts

BEIJING: China said on Sunday it is willing to engage in talks following European and American complaints that it is unfairly blocking foreign-made auto parts. “China accepts the request from the EU and the US for consultations. The time and place for the consultations remains to be decided,” the commerce ministry said. It said China’s ambassador to the WTO, Sun Zhenyu, had handed a formal letter to his US and EU counterparts expressing China’s willingness to talk. The EU and US announced they had lodged a complaint with the WTO over the issue, which enabled them to call for dispute settlement consultations with China. — AFP