Beijing - The European Union is expected urge China to allow its currency to appreciate against the euro at an upcoming summit in order to address trade imbalances, however, those demands are likely to be rebuffed by Beijing. Ahead of the summit of European and Chinese leaders in the eastern city of Nanjing on Monday, central bank and financial officials from both sides are to meet on the weekend. The EU side wants to convince China that a stronger yuan is also in China's interest.
China keeps its currency virtually pegged to the US dollar. As the dollar has weakened against other currencies, the yuan has dropped 20 per cent against the euro since the beginning of this year.
Key issues of Monday's summit are the global downturn, trade tensions and China's demand to be granted market economy status. With the meeting taking place only one week ahead of the global climate summit in Copenhagen, climate change is also expected be on the agenda.
Chinese Prime Minister Wen Jiabao, EU Commission President Jose Manuel Barroso and Swedish Prime Minister Fredrik Reinfeldt, whose country currently holds the EU presidency, are to sign cooperation agreements on science, technology, trade and economy as well as ecology.
On Sunday, representatives of China's central bank, finance ministry and the Communist party's powerful reform and devlopment commission are meeting with European Central Bank Governor Jean-Claude Trichet, eurogroup chairman Jean-Claude Juncker and Joaquin Almunia, the EU commissioner for economic and monetary affairs.
The EU's demands for a revaluation of the yuan are likely to fall on deaf ears in China, as Beijing has made it clear repeatedly that it wants to maintain its "basically stable" exchange rate.
The European believe the yuan is undervalued, which makes their exports to China more expensive, while at the same time artificially cheapens imports from China.
Business representatives claim that these additional burdens on European exporters could endanger the recovery of the eurozone.
In 2008, the EU imported goods worth 248 billion euros (370 billion dollars)from China, while its exports were only 78 billion euros. Between January and October 2009, the trade volume decreased by 18 per cent due to the global economic crisis, Chinese officials said.
The EU is China's biggest trade parter, holding a 17-per-cent share of China's foreign trade.
