Germany warns China’s currency manipulation will turn into trade war

Germany has thrown its weight behind the US and Japan in warning China that if does not stop manipulating the yuan, the repercussion will trigger a full scale global trade war and everybody would end up being losers.

Germany, the world's third-largest economy and Europe's largest exporter warned that it is up to China to ensure that its currency manipulation does not lead to a trade war.

The warning came a day after Germany's central bank Bundesbank president Axel Weber stated categorically yesterday that China manipulates its currency, becoming the first top banker from a western nation to say so.

With China remaining adamant and refusing to change its monetary policy, German economy minister Rainer Bruederle yesterday told leading German business newspaper  Handelsblatt daily that it was China's responsibility to prevent a destructive trade dispute with the US.

"We have to be careful that the currency war does not turn into a trade war. China bears the responsibility for ensuring that it does not come to an escalation,'' he said.

US Treasury Secretary Timothy Geithner yesterday said in an interview on PBS Television and later on Bloomberg Television that China was buying dollars in order to hold down the yuan, which was distorting the global currency system as it forces emerging nations to intervene in their own currency.