China should gradually revalue its currency to cool its booming export sector and also allow European companies fairer access to its market, the EU trade chief said yesterday.
Peter Mandelson, the EU's Trade Commissioner, said in an opinion piece published in the state-controlled China Daily that revaluation of the yuan would benefit the Chinese economy.
"Even on a difficult issue like the currency, China's interest clearly lies in a gradual revaluation that takes some of the excess heat out of the export sector and strengthens consumer purchasing power," he wrote.
Mandelson added that the revaluation should be combined with an opening-up of Chinese markets to reduce the ballooning trade deficit, which was worth about 130 billion euros (US$194 billion) in 2006.
China is widely criticized for allegedly allowing its currency to remain at an artificially low level, giving its exporters an unfair advantage and contributing to massive trade surpluses with the US and Europe.
Mandelson said European companies could not be blamed for the huge trade deficit.
"European companies compete effectively in every global market in which they are given a reasonably fair chance," he said. "However, in China, European trade and investment is still unfairly restricted, and European intellectual property rights, which are fundamental to our competitiveness, are poorly protected."
Mandelson has visited China, amid simmering tensions between the EU and China over a range of economic issues, from unfair practices to sovereign wealth funds.
The EU recently launched investigations to see if China was unfairly selling steel, cables and candles to Europe at below production cost, a practice known as dumping which can lead to retaliatory tariffs.
The European Commission, which runs the EU's international trade policy, is also considering launching WTO action against China for restrictions Beijing puts on foreign financial news organizations.