World Bank joins pressure on China currency

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The Chinese government is accused of artificially pegging the yuan's value on exchange markets. [Reuters]

Last Updated: Wed, 17 Mar 2010 19:12:00 +1100

Pressure is mounting on China to lift its currency's value on world foreign exchanges - a suggestion that aroused a sharp response from Premier Wen Jiabao last weekend.

Now the World Bank is urging China to let its currency rise to contain inflation and stop the economy overheating.

Beijing is clamping down on lending to calm inflationary pressures, as well as stem economic overheating and a surge in bad debts.

But the World Bank says higher interest rates and a stronger yuan would also help reduce inflationary pressures and rebalance the economy.

With growth expected to reach 9.5 per cent this year, China is facing growing international pressure to let the yuan - effectively pegged to the dollar since mid-2008 - to appreciate.

On Tuesday, United States senators introduced legislation to impose tough penalties on China if it fails to revalue its currency.

They say Beijing is keeping the yuan artificially low to secure an unfair edge in trade.