Chinese Premier Wen Jiabao said on Sunday that external calls for yuan appreciation were unhelpful and even a form of trade protectionism, vowing that Beijing would stick to its own course for currency reform.

Blending his trademark folksy tone with assertiveness born of leading the world's fastest-growing economy, Wen gave no ground on the controversial currency policy even as China hurtles toward a potentially serious clash with the United States.

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.

Our efforts to keep a stable yuan made an important contribution to global recovery, he said, restating the line that China has consistently used since re-pegging the yuan to the dollar in mid-2008 to cushion its exporters from the global financial crisis.

The United States, the European Union and others have long been critical of China's yuan regime. The chances of a dangerous confrontation are increasing ahead of an April 15 decision by President Barack Obama's administration about whether to formally label China as a currency manipulator in a semi-annual Treasury Department report.

Adding to the pressure, Senator Charles Schumer said on Friday that he plans to move forward legislation aimed at stopping China from manipulating its currency.

Without directly mentioning the United States, Wen made clear that Beijing was in no mood to submit to any demands from Washington and might even be girding for a fight.

I can understand some countries' desire to raise exports, but what I do not understand is depreciating one's own currency and attempting to pressure others to appreciate, for the purpose of increasing exports. In my view, that is protectionism, he said.

Many U.S. lawmakers complain China's currency is undervalued by as much as 40 percent.

Wen disagreed.

The Chinese yuan is not undervalued, he told reporters in the Great Hall of the People, where the legislature meets.


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.

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, Aileen Wang, Simon Rabinovitch, Yu Le, Lucy Hornby and Emma Graham-Harrison; Editing by Kazunori Takada)