China foreign minister warns against protectionism

[March 26, 2010]  BEIJING (AP) -- China's foreign minister warned against protectionism without mentioning the United States on Friday as trade tensions between two of the world's biggest economies remain high.

"The business ties among countries today are so close that if any country attempts to resort to the old practice of protectionism, and erect trade barriers, it can only end up hurting the interests of not only others but also its own," Yang Jiechi said in a speech in Beijing.

The Obama administration is under increasing pressure from some in Congress and the business community to declare Beijing a currency manipulator in a report due out in April. That could set the stage for a complaint to the World Trade Organization and possible sanctions on Chinese goods.

The United States is expected to make the currency issue a priority when U.S. Secretary of State Hillary Rodham Clinton and Treasury Secretary Timothy Geithner lead the U.S. delegation to the latest version of the twice-yearly Strategic and Economic Dialogue in China in late May.

China denies that its currency is deliberately undervalued to give Chinese exports a competitive advantage in world markets. Its commerce minister has warned that China would retaliate against any such measures by the United States, and a Foreign Ministry spokesman has said U.S. calls for yuan appreciation are a "bad example of protectionism that is detrimental to the recovery of the world economy."

Yang on Friday noted the tensions. "The overall trading environment is more complicated, the protectionist sentiments are on the rise," he said.

He urged cooperation among countries, including on the unresolved nuclear issues in North Korea and Iran, without mentioning specifics.

China moves, and speaks, carefully on the currency issue. Its central bank governor, Zhou Xiaochuan, said this month that currency measures would be withdrawn "sooner or later" but said Beijing will act cautiously because the global economic outlook is still uncertain.

Beijing broke its currency's link to the U.S. dollar in 2005 and allowed it to rise by about 20 percent through late 2008. But it has been frozen since then in what was seen as an effort by Beijing to keep its exporters competitive as global demand plunged.

Many analysts expect China's government will allow the yuan to gradually gain no more than 5 percent against the dollar this year while maintaining exchange rate controls. However, some speculate Chinese leaders might delay acting because they don't want to be seen as giving in to American pressure.

[Associated Press]

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