BEIJING—European Union Trade Commissioner Karel De Gucht said he expects China to make gradual adjustments to its exchange rate over time, but doesn't think that trade actions or other outside pressure will speed up the process.
Mr. De Gucht met with Chinese Commerce Minister Chen Deming in Beijing Tuesday, and said he had argued that a change in China's currency regime would be beneficial to both Europe and China. But Mr. De Gucht, who was meeting his Chinese counterpart for the first time since being named Europe's trade envoy in February, didn't hold out hopes for a quick resolution of an increasingly sensitive issue.
"I think we will have to wait some time. What I would expect is that you would see a gradual adjustment of the yuan," he said. "I really think they are only going to do it provided it is beneficial to their own economy. I think they will have to come to the conclusion that it is—if not, all the problems we witnessed before the crisis will come back."
China has kept the value of its currency roughly fixed around 6.83 to the U.S. dollar since July 2008 to support its exporters, a policy that has come under increasing criticism from many trading partners. Chinese officials have said they won't keep the current de-facto peg forever, but that the timing of any move will depend on economic conditions and not outside pressure.
"I think whatever methodology you are using you would come to the conclusion that there is an undervaluation" of the Chinese yuan, Mr. De Gucht said. On the other hand, he said "openly insisting" that China change its currency policy, or talking about legal actions targeting the currency within the World Trade Organizations, "is not going to resolve the matter."
Several U.S. lawmakers are supporting legislation that would impose trade sanctions on China unless it appreciates its currency. But U.S. officials, including Treasury Secretary Timothy Geithner, have in public taken a diplomatic line similar to Mr. De Gucht's, saying that they believe a move in the currency would be in China's interest, but that it's up to the nation's own government to decide what to do.
On other issues with China, the EU's second-largest trading partner after the U.S., Mr. De Gucht said he welcomed the recent relaxation of rules on how foreign companies can qualify for a favored "indigenous innovation" status in Chinese government procurement.
He also said Europe will press ahead with a case at the World Trade Organization against China's restrictions on exports of some raw materials, including bauxite, magnesium and zinc. "This is a geostrategic subject we have to pursue," Mr. De Gucht said, adding that he is confident that the plaintiffs—which in addition to the EU include the U.S. and several other nations—can get a "positive result" from a WTO tribunal.
