EU Adds Pressure on China to Revaluate Yuan

The European Union, together with the US and Japan, begun pressuring China to revaluate the Chinese Yuan. The EU`s policy is to discuss the foreign exchange rate of other neighboring Asian countries of China as well, so Korea is also expected to be influenced.

Wim Duisenberg, president of the European Central Bank said on September 15 that, at the joint conference of G7 and the International Monetary Fund, which will take place next week in Dubai, the EU will pressure China and its neighboring countries to ease the imbalance in the foreign exchange rates in order to find ways to promote export and to overcome the economic recession.

Such remarks were made after Wim`s meeting with Finance Ministers of EU member states in Italy, on September 13.

Saying that most of the Asian countries peg their currencies to the US dollar in one way or the other and that such actions are posing considerable burden on the Euro, Duisenberg emphasized that the necessity of establishing the foundation for fair exchange rate mediations. Related to this subject, Italian Finance Minister Giulio Tremonti said that, “we have decided to take responsive measures (against the Asian countries` foreign exchange rates),” but did not mention any specific measures.

State Secretary at the Ministry of Finance of Germany Caio Koch-Weser remarked that they could “either introduce the basket system of multiple currencies, which pegs a country`s currency with that of its major trading partners, together with revaluating the exchange rates, or take measures to widen the range of fluctuation.”

According to the EU countries, the Chinese Yuan being fixed at 8.3 Yuan against the dollar, while the Euro has been appreciated by around 15% against the dollar, has contributed in reducing export volume of the EU member states and in the economic growth rate`s recording the lowest in 10 years.

Consequently, the US, the EU and Japan are expected to take joint measures to revaluate the Chinese Yuan.

Korea is currently designated as one of the countries that manipulate currencies by the “Association for Sound Dollar” which was formed by the 82 Industry Associations in the US, putting Korea under the influence of the “foreign exchange rate war.”

Jin Lee leej@donga.com