* China tells EU to stop pressing on yuan, warns of unrest
* EU urges China to stop tech theft, counterfeiting
* EU signs free trade pact with South Korea, first with Asia
* Chinese industrialist faults U.S. investors on copying
(Adds Wen's reference to U.S. dollar)
By Juliane von Reppert-Bismarck
BRUSSELS, Oct 6 (Reuters) - Chinese Premier Wen Jiabao told
the European Union on Wednesday to stop piling pressure on
Beijing to revalue its currency, saying a rapid shift could
unleash disastrous social turmoil.
Wen told an EU-China business forum in Brussels that China
would implement a reform of its currency regime announced in
June, making the exchange rate more flexible, but rebuffed calls
from EU leaders for a rapid and substantial appreciation.
"Do not work to pressurise us on the renminbi rate," the
premier said, departing from a prepared speech to a business
forum on the sidelines of a summit with EU leaders. "Yes, we are
going to proceed with the reforms."
Wen said EU leaders should turn to the U.S. dollar for an
explanation of the fluctuations in the exchange rate of the
euro. He said China's trade surplus against the United States
was due to the specific structures of the two economies, not the
yuan exchange rate.
He noted that a U.S. congressman had predicted social unrest
in China if there was a rapid rise in the currency, known as the
renminbi or yuan.
"Many of our exporting companies would have to close down,
migrant workers would have to return to their villages.
"If China saw social and economic turbulence, then it would
be a disaster for the world," Wen said.
The United States and the European Union accuse China of
keeping its currency artificially weak to promote exports,
undermining jobs and economic growth in the West.
The monetary standoff came amid growing signs of a "currency
war" in which major industrial nations such as Japan and the
United States are seeking to weaken their exchange rates while
emerging economies such as Brazil and South Korea are taking or
threatening measures to curb capital inflows. [ID:nLDE693210]
Factbox on EU-Asia trade disputes, click on [ID:nLDE6901RU]
Factbox on EU talks with other Asian states [ID:nLDE6941Q6]
Graphic on EU trade with Asian partners, click on
The 27-nation EU also pressed Beijing on Wednesday to amend
its trade practices to put an end to technology theft,
counterfeiting, discrimination against foreign firms and Chinese
export controls on rare minerals used in high-technology goods.
European Commission President Jose Manuel Barroso said the
EU-China commercial relationship, worth 327 billion euros ($453
billion) in 2009, was one of the most important in the world.
"There is a feeling that economic openness in China could be
greatly enhanced," he told the business forum.
German Chancellor Angela Merkel, leader of Europe's biggest
export powerhouse, met Wen on Tuesday and pledged to work for
China to be granted the 27-nation EU's coveted "market economy"
trade status by 2016. [ID:nLDE69429L]
That would give Beijing better protection against European
anti-dumping penalties -- a major irritant for the Chinese.
EU Trade Commissioner Karel de Gucht earlier set out a
litany of European grievances on which he said China must make
progress if it wanted that status before it automatically
receives it in 2016 under World Trade Organisation rules.
"This question must be considered on the basis of clear
commitments, for example, on access to the Chinese market,
public procurement, protection of intellectual property and even
the exchange rate," he told French daily Le Monde.
The EU signed a free trade agreement with South Korea on
Wednesday which could double commerce between them, its first
such pact with an Asian partner, after announcing on Tuesday the
launch of negotiations for a similar accord with Malaysia.
The deal with Seoul, which takes effect on July 1 pending
ratification by the European Parliament, will eliminate 1.6
billion euros ($2.2 billion) of duties a year for EU exporters
and tackle non-tariff barriers, like regulations and standards
in sectors such as cars, drugs and consumer electronics.
With the Doha round of global trade liberalisation talks at
an impasse, Brussels is increasingly looking to bilateral and
regional agreements as a way to boost commerce.
The United States urged the EU this week to join it in
high-level pressure on China to change policy on intellectual
property rights and foreign investment. [ID:nLDE69311J]
While some European business leaders want the EU to develop
new trade defence instruments that could be used as leverage to
change Chinese practices, others are against such sanctions,
which would divide member states.
Marc Stocker, from the main EU industry umbrella group,
BusinessEurope, said Europe should resist calls to join a move
by the U.S. Congress to impose trade sanctions on China for
failing to revalue the yuan. "Trade retaliation is, as such, not
a good response," he said.
The EU's trade deficit with China fell to 133.1 billion
euros in 2009, from 169.5 billion euros in 2008, largely due to
the global economic downturn.
But EU industry has said China will benefit from Europe's
economic recovery, cranking up its production capacity to supply
European demand for cheap industrial inputs and consumer goods,
and encroaching on traditional European high-tech markets.
The chairman and founder of China's Zhejiang Geely
automaker, Li Shufu, told Reuters some of the investors who
funded counterfeiting were likely based in the United States.
"There should be measures to punish violators, but also
their investors. Without financial support there could not be as
much violation of intellectual property rights," he said.
In recent months the EU has launched several anti-dumping
cases. These could result in steep tariffs against Chinese-made
products, from fibreglass used in the production of wind
turbines and lightweight cars to car wheels and wireless modems.
(Writing by Paul Taylor, editing by Rex Merrifield and Ralph