EU keeps low profile in U.S.-China currency row (2)

16:40, April 05, 2010      

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"We have issues to discuss with them (Chinese officials), but I would not speak of a generalized conflict situation," De Gucht told the Financial Times.

Jean Pisani-Ferry, director of the Brussels-based economic think tank Bruegel, said in an interview with Xinhua that the transatlantic divergence implied that the EU and the United States might have different stake in the issue.

"The EU is not in the same camp with the U.S.. In a number of dimensions, it is in a similar situation as the U.S., but in other dimensions, it is not," he said.

For the EU, it is not simply the appreciation of yuan against the U.S. dollar or the euro. An additional concern is the evolution of the exchange rate between the euro and the U.S. dollar, analysts said.

"In Europe, there is a concern about the exchange rate of the U.S. dollar. Traditionally, France is more vocal about the U.S. dollar exchange rate because of its specializing in aerospace and the implication of the dollar-euro exchange rate for Airbus versus Boeing," Pisani-Ferry said.

If China is forced to appreciate its currency against the U.S. dollar, Beijing may consider diversifying its foreign reserves and turn to stronger euro assets, which would push up the exchange rate of the euro against the U.S. dollar, according to analysts.

Pisani-Ferry said that in the short term, if the yuan kept its link with the U.S. dollar and China accumulates its dollar reserves, it would help contain the depreciation of the dollar against the euro, but that was not sustainable in the medium and long term, so a well-managed transition to a new RMB exchange-rate regime was preferable for the EU.

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