Premier: China’s yuan to remain ‘basically stable’

China’s premier said Sunday it will reform controversial exchange rate controls but will keep its currency “basically stable” and he rejected foreign pressure over the issue.

Speaking at a news conference, Premier Wen Jiabao gave no indication when Beijing might allow its yuan to rise against the U.S. dollar — a move sought by Washington and other trading partners. They say the yuan — also known as the renminbi — is kept undervalued, giving China’s exporters an unfair price advantage and swelling its trade surplus.

“We will continue to reform the renminbi exchange rate regime and will keep the renminbi basically stable at an appropriate and balanced level,” Wen said.

Wen rejected foreign pressure, which he said would not help reforms.

“We oppose all countries engaging in mutual finger-pointing or taking strong measures to force other nations to appreciate their currencies,” he said. “This kind of practice is not in the interests of reforming the renminbi exchange rate regime.”

Some American lawmakers and trade groups want Congress to impose punitive tariffs on Chinese goods if Beijing fails to act. Critics say the yuan is undervalued by up to 40 percent against the dollar.

China also faces pressure to allow the yuan to rise in order to ease inflation and other strains in its own economy. A stronger currency also could help Beijing to achieve its goal of making the economy more self-sustaining by boosting consumer buying power and reducing reliance on exports and investment.

Analysts expect Beijing to let the yuan rise against the dollar some time this year. But they foresee a gradual increase of no more than 5 percent this year, which would not produce dramatic changes in the U.S. and European trade deficits.

Beijing tied the yuan to the dollar for decades, but broke that link in 2005 and allowed it to rise by about 20 percent through late 2008. The government slammed on the brakes after the crisis hit and has held its currency steady against the greenback to help exporters compete as a plunge in global demand wiped out millions of Chinese factory jobs.

“Since the outbreak of the international financial crisis, we have made strong efforts to keep the renminbi exchange rate at a stable level,” Wen said. “This has played an important role in facilitating the global economy.”