BERLIN, Oct 13 (Reuters) - China should make concessions to avoid escalating foreign exchange tensions turning into a trade war, German Economy Minister Rainer Bruederle was quoted as saying on Wednesday.
"We have to be careful that the currency war doesn't turn into a trade war," Bruederle told Handelsblatt newspaper. "China bears a lot of the responsibility for avoiding an escalation."
Record low interest rates and anaemic growth in developed economies have prompted global investors to pour money into higher-yielding emerging markets, driving up local currencies and assets.
Fearing a loss of competitiveness and speculative bubbles, several nations have been intervening in markets or trying to contain capital flows, giving rise to concerns that uncoordinated action could escalate into a "currency war".
"Exchange rates should form on the market.... Interventions are rarely promising and at best have short-term effects," said Bruederle, en route to China for an official visit.
"I'm campaigning on this trip for concessions from China. I see myself as a missionary in the fight against protectionism."
The People's Bank of China fixed the mid-point, which it uses to guide the yuan's movement, at a record high on Wednesday. [ID:nTST000512] Bruederle said punitive tariffs such as those the United States is considering against China are no solution.
"Punitive tariffs as a reaction to forex manipulation only lead to a backlash. Everyone loses from protective measures."
But no new international instituitons were needed to fight forex manipulation, Bruederle said.
"We have to try to agree on a common line internationally. I expect this will succeed given the background of good international cooperation so far -- also in the framework of the G20."
"We don't need new institutions, the existing framework suffices completely," said the German minister.
(Reporting by Annika Breidthardt; editing by Patrick Graham)