Tensions have been building up between the European Union and China for quite some time now. For one thing, China re-pegging the dollar and the dollar in turn depreciating against the euro means that the single currency has borne the brunt of a lot of largely non-existent global reblancing in currency terms. That is, old Europe has become the pressure release valve in a world where the Middle East and Asia are still busy propping up the greenback. Then there's also the not-so-negligible matter of the EU engaging in a tariff-slapping frenzy against our PRC friends. Add these up--perceived Chinese intrasigence on the currency front and EU activism on the trade measures front and you have a recipe for trouble.It is thus unsurprising that things have blown up at an EU-China summit in Beijing as neither side is in much of a mood to give in. We begin with Shoeful Wen Jiabao, who has previously described China's economy as "unbalanced, unstable, uncoordinated, and unsustainable. In giving the PRC's European critics a tongue lashing, he seems to hew to the party line of gradual revaluation when circumstances permit (nevermind that the RMB has been stuck at the same level since June 2008) and, er, keeping things as they are--unbalanced, unstable, uncoordinated, and unsustainable. From the FT:
China’s premier Wen Jiabao on Monday lashed out at the growing number of countries pressuring Beijing to strengthen its currency, making it clear that European officials made little headway in their efforts over the past two days to persuade the country to allow the renminbi to appreciate.The EU's representatives didn't even bother to counter Shoeful Wen's tirade:
Speaking at the conclusion of an EU-China summit in the eastern Chinese city of Nanjing, Mr Wen said: “Some countries on the one hand want the renminbi to appreciate, but on the other hand engage in brazen trade protectionism against China. This is unfair. Their measures are a restriction on China’s development.”
The premier repeated the standard form of words Beijing uses to describe its currency policy. Mr Wen said: “We will maintain the stability of the renminbi at a reasonable and balanced level ... maintaining the basic stability of the renminbi exchange rate has benefited China’s economic development and benefited world economic recovery.”
Mr Wen’s candid tone contrasted with the conciliatory note struck by European leaders who addressed the same press briefing. They did not mention the renminbi after Monday’s talks, and abruptly cancelled a press briefing in which they would have faced uncomfortable questions about Mr Wen’s aggressive tone.Being cynical old me, I predict this latest outburst and non-reaction from the Chinese will likely set the stage for the US and China joining forces to engage in China-bashing actions. Certainly, that's the conclusion the FT article would suggest giving its framing of the outburst. The advantage here is that it becomes harder to single out a party as unfairly picking on China when many express similar concerns about currency undervaluation. Heaven knows, they already have a blueprint for beginning the beguine.
Speaking on Sunday, after senior eurozone officials met Premier Wen and other Chinese policymakers, European officials made clear they had made little progress with Beijing. Jean-Claude Juncker, Luxembourg’s prime minister, who chairs eurozone finance minister meetings, said “I can’t say I am more optimistic than I was before I came here” about China’s plans to strengthen its currency.
José Manuel Barroso, European Commission president, who met Premier Wen for a private dinner on Sunday night, said: “The Chinese reiterated their position on the matter … They are telling us exactly what they told President Obama – exactly the same.”
BTW: Chinese official media has articles on trade missions being opened (a traditional gesture for appeasing critics during economic summits and the like) and this not being cause for the outbreak of trade war.
