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UPDATE 1-EU urges China to let yuan rise faster, Wen demurs

Published 10/05/2010, 04:25 AM
Updated 10/05/2010, 04:28 AM

(Adds Juncker on Chinese reaction)

BRUSSELS, Oct 5 (Reuters) - Euro area policymakers urged China on Tuesday to allow an "orderly, significant and broad-based appreciation" of its currency but said Chinese Prime Minister Wen Jiabao had differed with them.

The chairman of euro zone finance ministers, Jean-Claude Juncker told a news conference after talks with Wen in Brussels: "China's real effective exchange rate remains undervalued."

Asked how Wen had responded, he said the message came as no surprise to the Chinese delegation, but added in French: "The Chinese authorities do not share our view."

Wen did not attend the news conference. On Monday, he told an EU-Asia summit that China's objective was to ensure relative stability of the major reserve currencies.

Juncker said the 16-nation European currency area welcomed China's June 19 decision to make the yuan's exchange rate more flexible, but that policy had not yet been sufficiently turned into reality on currency markets.

He and European Economic and Monetary Affairs Commissioner Olli Rehn both said Wen had reaffirmed China's commitment to the flexibility decision.

However, European Central Bank President Jean-Claude Trichet told the same news conference: "We noted that the evolution in terms of effective exchange rates, and also vis-a-vis the euro, were not exactly what we would have hoped ourselves, and I do not insist on the fact that this exchange rate flexibility in our view is very, very much in the interests of China, which again has taken this orientation and is also a contribution to global growth which is very important."

Trichet welcomed Wen's offer, made during a visit to Greece on Saturday and Sunday, to buy Greek government bonds when debt-stricken Athens, which received a 110 billion euro ($151 billion) IMF-euro zone rescue package in May, returns to capital markets.

"I said we have appreciated the declaration of intention of the prime minister in particular on his confidence in sovereign treasuries in Europe," Trichet said.

He added that the ECB had very close cooperation and dialogue with the Chinese central bank.

(Reporting by Marcin Grajewski, writing by Paul Taylor)

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