China's yuan dominates Asia-Europe meeting

Chinese premier Wen Jiabao has told Asian and European ministers that China favoured a flexible currency regime but would not be rushed into action as much preparation was still needed to avoid economic shocks.

The Chinese currency's rigid peg to the US dollar became a hot topic among participants of an Asia-Europe Meeting (ASEM) of finance ministers in the northern Chinese port city of Tianjin, although it was not officially on the agenda.

Speaking to delegates from nearly 40 member countries of the forum, Wen said China's goal in reforming the yuan was to move independently to a market-based and floating exchange rate system, but he remained cautious about the timing.

"We must take into consideration both the present needs and the future development and guard against undue haste," he said.

Beijing is under intense pressure from its trading partners, especially the United States, to loosen the yuan's peg to the dollar, which critics say gives Chinese exporters an unfair advantage in international markets.

China keeps the yuan pegged around 8.28 to the dollar.

"Since this reform involves a wide range of areas and will have a far reaching impact, it still requires a great deal of preparation to help create an enabling environment for all sides to sustain the possible impact," Wen said.

Wen's remarks stimulated discussions on the yuan among some participants in a morning session of the ASEM meeting, which also focused on soaring oil prices and economic conditions in Asia and Europe, an official who attended the meeting told Reuters.

Speaking shortly after Wen's speech, Belgium's finance minister Didier Reynders told reporters that he hoped China would not take too long to reform the yuan.

"I hope it's not a long time. I hope it is possible to organise reforms in a short time. If that's possible, we must go to a more market-oriented currency model, more market-oriented RMB within next months or years."

The ministers are set to agree on a "Tianjin Initiative" later on Sunday, which aims to establish a new dialogue mechanism for coordinating policy responses to crises in the wake of the December 26 tsunami.

ASEM finance ministers last met in Indonesia in 2003. A meeting last year was scrapped following political wrangling over whether or not military-ruled Myanmar should become a member.

Myanmar, Laos and Cambodia were formally admitted to ASEM in October alongside 10 new EU member states ASEM, whose members account for some 60 per cent of world trade, is one of the few international groupings not to include the United States.

But reflecting declining enthusiasm about the forum, which many key European finance ministers had often skipped, the delegates are set to agree on reducing the frequency of their meetings from once a year to once every two years, sources said.

- REUTERS