G7 presses China for currency reforms as its trade surplus rises 67 per cent

With booming exports, China opened 2007 with a strong trade surplus that is a 67-per cent in January, a development that is likely to increase pressure on Beijing to allow its currency to float freely.

In January 2007, China had a $15.9 billion trade surplus, compared with $9.5 billion a year ago. China''s trade surplus with the European Union reached $26.4 billion in January, while that with the US totalled $23.41 billion.

Although China denies it, the West has long said that the country keeps its currency, the yuan, deliberately undervalued to keep its exports low-priced. Its overall trade suplus for 2006 hit a new record of $177.47, up 74 per cent on 2005.

At present China only allows the yuan to trade in a very narrow field against the dollar, but it has long pledged to allow the yuan to trade more freely as and when this is possible. China says it needs to be cautious about this to prevent unsettling its economy.

On Friday, the G7 finance minister called on China to increase its currency flexibility.

At the end of their meeting at Essen, Germany, they said China needed to speed-up efforts to improve the exchange rate flexibility of its yuan currency.

The G7 meeting, which began on Friday evening, brought together the finance leaders of Canada, Britain, France, Germany, Italy, Japan and the US. China, which recently leapfrogged Britain to become the world''s fourth largest economy was invited to the talks despite not being a G7 member.

China''s finance minister, Jin Renqing, assured the G7 ministers that the country would "continue to strengthen macroeconomic adjustments".

In addition to China, other non-G7 nations in attendance at the meeting were Brazil, India, Mexico, Russia and South Africa.