Fillon uses China visit to call for more flexible yuan

French Prime Minister François Fillon, on the final day of his visit to China, urged Beijing to make its exchange rate more flexible to help promote economic cooperation between France and China.

REUTERS - France's Prime Minister urged China to adopt a more flexible exchange rate policy, saying in Beijing on Tuesday that such a move would reduce China's dependence on exports and raise consumers' purchasing power.

Francois Fillon also called for a more stable international monetary system that would avert sharp imbalances, pointing to a weak dollar as well as China's inflexible exchange rates as being out of line with economic fundamentals.
 
"A progressive evolution towards a more flexible exchange rate regime would reduce Chinese firms' dependence on the international market and would support an increase in consumers' purchasing power," Fillon said in a speech at the Beijing University of Aeronautics and Astronautics.
 
China has unofficially kept its yuan pegged to the dollar for about 18 months now, to help keep its export industries competitive. That has meant the value of the yuan has slid against other currencies, including the euro, as the dollar has weakened.
 
All the hopes for economic cooperation between France and China "could be ruined by currency values that do not correspond to economic reality," Fillon told an audience of students.
 
Fillon said France would work towards more international cooperation in foreign exchange markets when it heads the Group of 20, or G-20, in 2011, calling for "a more stable, more flexible system that better reflects the real state of our economies."
 
"The crisis revealed the limits in the international monetary system," Fillon said.

"A system of gradual change must be developed that will avoid excessive currency volatility and prevent exchange rate misalignment."
 
On Monday, Fillon witnessed the signing of nuclear power and aircraft engine deals for French firms in China, in a sign of thawing ties after two years of tension following outspoken French criticism of Chinese policies towards Tibet.

French firms have worried that the weak dollar hurts their competitiveness as they compete to sell high-tech products.

"It is not normal that, with identical production costs, a plane that is built in Europe costs more today than a plane built in the United States, simply because of a difference in value between the dollar and the euro that does not relate in any way to the financial or economic realities of Europe and the U.S.," Fillon said.
 
"If we want to avoid fresh upheaval, the overwhelming priority is to put in place an international monetary system that avoids imbalances that are extremely dangerous for the stability of the world economy."

Date created : 2009-12-22