Rise of yuan against dollar has ended - Wen

BEIJING (AP) — China’s premier suggested Wednesday the rise of its yuan against the dollar has ended, possibly fueling tensions with the US amid complaints the tightly controlled currency is undervalued and distorts trade.

Frictions over China’s currency are acute at a time when governments are trying to boost exports and avert a new global slowdown. Washington and other nations complain an undervalued yuan gives China’s exporters an unfair price advantage and wipes out jobs abroad.

Premier Wen Jiabao, speaking at a wide-ranging, three-hour news conference at the end of China’s legislative session, said the yuan has gained 30 percent in real terms since 2005 and has moved up and down since September in Hong Kong trading of nondeliverable forward contracts. Such contracts track the movement of currencies that are not freely traded, and are settled in dollars or other hard currencies.

“That shows that the renminbi exchange rate may possibly have reached an equilibrium exchange rate,” said Wen, the country’s top economic official.

Wen pledged to create a more flexible, market-based exchange rate system.

“We welcome greater elasticity of the renminbi exchange rate,” he said.

Wen’s comments are likely to frustrate critics including American lawmakers who are pressing for higher tariffs on Chinese goods.

China’s normally huge trade surplus plunged to a rare $31.5 billion deficit in February. Some commentators took it as a sign the yuan has reached a fair exchange rate. But others said it was a one-time event, noting China often has a trade deficit early each year as factories restock after the Lunar New Year holiday.

On Tuesday, the United States, the European Union and Japan opened a new front in trade disputes with Beijing when they filed complaints with the World Trade Organization challenging its controls on rare earths mining and exports. US President Barack Obama accused Beijing, a WTO member, of going against free-trade rules it promised to follow.

Wen did not mention that case at Wednesday’s news conference but appealed for closer cooperation with Washington to resolve “difficulties and frictions.” He gave no indication of possible concessions on complaints about market barriers and other disputes.

Wen called for US-Chinese collaboration in clean energy, environmental protection, aviation and other technology fields.

The premier also said China plans to invest in US infrastructure — a possibility first raised in November by the chairman of Beijing’s sovereign wealth fund. Wen gave no timetable or possible targets for investment.

“China will make investment in infrastructure construction in the United States, and that will help contribute to the generation of local jobs,” Wen said.

Turning to the domestic economy, Wen announced no new reforms but promised more steps to achieve previously announced goals of making China’s economy cleaner and more efficient after three decades of rapid growth driven by low-cost labor.