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China urges unity against 'disaster' as Europe squabbles

world Updated: Feb 02, 2009 20:22 IST

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China on Monday called for urgent coordinated action to avoid a global economic catastrophe, even as fresh splits emerged within the European Union on dealing with the spiralling crisis.

"When bubbles burst, the world is exposed to disaster," Chinese Premier Wen Jiabao said during talks with British Prime Minister Gordon Brown in London amid fresh reports world wide of job losses and industry bailouts.

"This financial crisis is a global one. No single country can remain immune and address this in isolation. We are sitting in the same boat and we need to all work together to overcome the difficulties," he said.

Wen's comments came amid fears of a rise in protectionism during the crisis, and as China and France pointed to sharp rises in unemployment.

The role of China, backed by its new economic power, is an emerging as an important force in the unfolding economic crisis.

New US Treasury Secretary Timothy Geithner has resumed a long-standing US charge that China keeps its currency artificially low to keep its exports cheap, thereby upholding economic growth.

However, the Chinese economy is now slowing sharply, mainly because foreign demand has dropped.

Economists say that the exchange rate of the yuan is an issue, but warn that US pressure over the exchange rate could alienate China, one of America's biggest creditors, in a year when the US needs to raise as much as USD 2.5 trillion in new debt through bond issues.

Investor eyes were fixed on Washington this week, where President Barack Obama was pushing his USD 819-billion stimulus package through Congress.