Mr. Barroso and Mr. Wen met during talks Photo: BBC
For many years now the United States has pressured China to end the artificial depression of the yuan, a step that would help balance the one-sided trade surplus, to no avail.
Today, EU representatives received the same treatment in their call for China to allow the yuan to appreciate in regards to the Euro.
Chinese Prime Minister Wen Jiabao openly rejected the call from EU representatives in Nanjing, saying that it was unfair of Europe to demand exchange rate changes while maintaining trade protectionism.
EU representatives are upset with the fact that China has pegged the yuan to the weak US dollar, hurting EU exports to China and causing a growing trade surplus in China's favor.
Mr. Wen asserted that China's current exchange rate was fair and balanced, as well as a key contributing factor to China's economic recovery and aided directly in the global recovery from the current recession. In answer to the call for yuan appreciation, Wen condemned countries that he said were calling for appreciation, while engaging in "brazen trade protectionism against China".
Wen was also quoted as saying that the call was unfair and amounted to "restricting China's development."
The EU is China's largest market at 20% of the countries exports. Thus, when European Commission President Jose Manuel Barroso urged China to address the exchange rate issue on Sunday, he surely expected to get a more cooperative response from Prime Minister Wen.
On Monday, Barroso did not make any mention of the dispute and the EU representatives canceled the last scheduled news briefing. Though China says it indeed wants its currency to be internationally convertible, the trading giant is showing no signs of relinquishing state control of the yuan.
Perhaps the most concerning revelation from the meeting is the trade power that China holds. The giant holds trade-surpluses with both the EU and the US, yet both are helpless to create any change in China's stance on the exchange rate, nor or either willing to take any punitive steps in forcing China to do so. Such power in the hands of China should indeed cause concern as it appears the West is in the hands of Beijing.
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