China warns of tougher currency competition ahead
China has warned that intervention by major economies in foreign exchange markets could increase in the future, amid ongoing fears of a "currency war" that could endanger the global recovery.business Updated: Nov 02, 2010 15:50 IST
China has warned that intervention by major economies in foreign exchange markets could increase in the future, amid ongoing fears of a "currency war" that could endanger the global recovery.
The comments from the Chinese commerce ministry, published Monday in a report on foreign trade, come as leaders of the Group of 20 major economies prepare to gather in Seoul next week with currency disputes high on the agenda.
China is at the centre of the furore, with the United States and Europe charging that it deliberately keeps the value of the yuan low to benefit exporters. Beijing has refuted the claim and said any sudden change could wreak havoc.
"In the mid-term, the US dollar will continue to weaken and the competition between major currencies on exchange rates will intensify, increasing risks for businesses and affecting international trade development," the ministry said.
"The yuan is under rather enormous appreciation pressure. Both foreign exchange risks and competition pressures are on the rise for companies," it said.
"Many countries turn to depreciation of their currencies to stimulate exports and the economy." Japan and other Asian countries have in the last few weeks moved to weaken their currencies to protect exports, sparking concerns of a return to the "beggar-thy-neighbour" policies at the heart of the 1930s Great Depression.
European Union leaders last week urged Group of 20 heads of government to use their summit in South Korea next month to avoid a currency war so as to prevent trade protectionism that could derail the global economic recovery.
The Chinese commerce ministry voiced worries that China, as the world's top exporter, would become the main target of protectionism and said it expected growth of the country's foreign trade to slow next year.
Commerce minister Chen Deming was quoted in state media as saying last week that China was expected to have a trade surplus in 2010 of 180 billion dollars, down from 196 billion dollars last year.