The yuan has risen strongly against the euro and this appreciation will harm Chinese exporters, a Commerce Ministry official said on Monday.
Pegged to a rising dollar, the yuan has appreciated against a trade-weighted basket of currencies in recent months, which many analysts believe could constrain the scope for a possible revaluation of the Chinese currency.
Commerce Ministry spokesman Yao Jian did not say how dollar strength might affect a long-awaited move to resume yuan appreciation, but he highlighted the impact of the weaker euro.
The yuan has risen about 14.5 percent against the euro during the past four months, which will increase cost pressure for Chinese exporters and also have a negative impact on China's exports to European countries, he told a news conference.
The yuan hit its strongest level against the euro since late 2002 on Monday as the euro tumbled against the dollar on global markets. The yuan was quoted at 8.3815 against the euro, versus Friday's close of 8.5351.
With a focus on defending exporters' interests, the Commerce Ministry is the staunchest opponent of yuan appreciation within the Chinese government. Beijing has held the yuan at about 6.83 to the dollar since mid-2008, in an attempt to cushion the economy from the global financial crisis.
Despite international criticism, Beijing has maintained that this yuan policy has contributed to global economic stability and should be decided by itself. Yao reiterated that position.
We should not politicize the yuan issue. It is China's own business, he said. Yuan appreciation is not the way to rebalance the global economy.
China's yawning trade surplus was seen as a key global economic imbalance in the lead-up to the financial crisis, but the numbers have changed over the past year with the growth of Chinese imports outpacing that of exports as the domestic economy booms and other major economies struggle.
The trade surplus will fall steeply in 2010, Yao said.
This reflects a greater balance in international balance of payments, he said.
China recorded a $196.1 billion trade surplus last year. After narrowing surpluses in the first months of 2010, including a deficit in March, many economists believe the country could be on course for a surplus of roughly $100 billion this year.
(Reporting by Aileen Wang and Simon Rabinovitch; Editing by Nick Macfie)