China raises fears of major trade war

A MAJOR trade war between China and the West appeared to be looming last night after the Chinese premier insisted he will not be rushed into revaluing his currency.

The news escalated tension with the US, which was last week shaken by a £10.3bn takeover bid by the China National Offshore Oil Corporation for American major Unocal.

Congress has threatened to put up trade barriers unless China takes immediate action and revalues its currency. The renminbi is currently pegged to the dollar, and US politicians argue that this allows exporters an artificial advantage when trading with America.

There is growing public discontent with the rise in Chinese imports, which has coincided with a trend towards outsourcing jobs abroad. But Prime Minister Wen Jiabao told a meeting of Asian and European ministers in China that it would not allow the US to rush it into currency reforms.

'We must take into consideration both the present needs and the future development and guard against undue haste,' he said.

'Since this reform involves a wide range of areas and will have a far reaching impact, it still requires a great deal of preparation to help create an enabling environment for all sides to sustain the possible impact.'

Meanwhile, the Chinese commerce ministry lashed out at the European Union for a probe into its shoe exports. 'China urges the EU to start with the facts, make prudent decisions and avoid trade frictions,' it said in an announcement.