Chinese Premier Wen Jiabao said on Sunday that external calls for yuan appreciation were unhelpful, vowing that Beijing would stick to its own course for currency reform while also warning of global economic risks.
Blending his trademark folksy tone with assertiveness born of leading the world's fastest-growing economy, Wen made clear that China would decide for itself whether and when to let the yuan rise again after re-pegging it to the dollar since mid-2008.
We oppose the practice of mutual recriminations. External pressure is not helpful for yuan exchange rate reform, he told a news conference to mark the end of China's annual parliament meeting.
China will stick to implementing a managed market-based and floating exchange rate regime. We will keep the yuan basically stable at a reasonable level.
China's ruling Communist Party has sought to use the Party-run parliament to promote plans to raise welfare spending for farmers and other poorer citizens, even as the government tightens its belt after a burst of feverish spending last year.
But the parliament meeting has coincided with the release of data suggesting China faces inflationary pressures that could require more intensive policy tightening, and also by insistent international calls for Beijing to let the yuan appreciate.
China escaped the worst of the global slump by ramping up credit, slashing interest rates and launching a 4 trillion yuan ($585 billion) infrastructure stimulus programme in late 2008.
Its economy grew 8.7 percent last year as a result, by far the fastest pace of any major country. But price increases have followed in the wake of that burst of spending and easy credit.
Consumer price inflation rose to 2.7 percent in the year to February from 1.5 percent in the year to January, spurting to a 16-month high, according to data released last week. The government wants to limit inflation for the whole year to 3 percent.
China has frozen the yuan's exchange rate at around 6.83 per dollar since mid-2008 to cushion its exporters from the financial crisis, drawing complaints from the United States and others that Beijing is providing an unfair subsidy to its firms.
First, I think the Chinese yuan is not undervalued, Wen told reporters in the Great Hall of the People, where the legislature meets.
Since the outbreak of the global financial crisis, our efforts to keep a stable yuan made an important contribution to global recovery.
Many U.S. lawmakers complain China's currency is undervalued by as much as 40 percent, and President Barack Obama said on Thursday it was important for China to move to a more market-oriented exchange range.
More domestically driven growth, led by consumers more confident about their healthcare, incomes and welfare, is needed to keep the world's third-biggest economy growing at a solid pace, Wen told the parliament session on its opening day on March 5.
Wen unveiled rises of 8.8 percent on social spending and 12.8 percent on rural outlays, more than the rise of 7.5 percent in the military budget, to narrow the wealth gap economists blame for dampening domestic consumption.
(Additional reporting by Chris Buckley and Langi Chiang; Editing by Ken Wills & Kazunori Takada)