"We discussed the exchange rate policy, the de facto peg of the yuan," Jean-Claude Trichet told reporters at a briefing after talks between EU officials and Wen in the eastern city of Nanjing.

He said officials encouraged Beijng to take "a more flexible policy," adding "it seems it would be appropriate."

The talks, which also involved Eurogroup chief Jean-Claude Juncker and EU economic and monetary affairs commissioner Joaquin Almunia, took place a day ahead of a major China-EU summit expected to focus on climate change.

The yuan currency's exchange rate is one of the thorniest issues between China and the European Union.

The Chinese currency has been effectively pegged to the dollar since the summer of 2008, and Europe fears the euro's rise against the yuan will hurt EU exports to China and eventually slow the continent's economic recovery.

But Beijing, which faces complaints from both the United States and Europe that it is manipulating its currency to gain an unfair trade edge, says it wants to take its time and reform its exchange rate system.

Juncker also told reporters that the global economic recovery was not strong enough yet to withdraw stimulus measures introduced by various governments to fight the financial crisis.

"We are considering the moment has not yet arrived to withdraw the stimulus packages that are under way in various parts of the world," he said.

"The euro area will see no major withdrawal of stimulus measures in 2010."

EU figures show resilient China trade, lower deficit
Brussels (AFP) Nov 27, 2009 - The European Union issued new figures on Friday showing that the bloc's trade deficit with China narrowed in the first half of the year, three days from a bilateral summit in China.

In the first half of 2009, when the euro was rising against the dollar, to which the Chinese yuan is de-facto pegged, the value of EU exports to China fell to 37 billion euros (55.5 billion dollars) from 39 billion dollars in the corresponding period of 2008.

The EU's statistics agency said imports fell faster to 103 billion euros from 112 billion euros, meaning the trade deficit for the 27 EU countries with China dropped to 65 billion euros from 73 billion euros between January and June last year.

However, the fall "was less steep than the general downward trend" in the EU's total external trade, said a statement from Eurostat, which highlighted China's place as the bloc's second most important trading partner after the United States.

European Central Bank governor Jean-Claude Trichet, outgoing Economic and Monetary Affairs Commissioner Joaquin Almunia -- due to take up the competition portfolio -- and the formal head of the group of 16 countries that use the euro, Luxembourg Prime Minister Jean-Claude Juncker, will hold talks with Chinese Premier Wen Jiabao on Sunday.

These precede the first full summit between the EU and China in two years, after last year's was cancelled amid Beijing protests at French President Nicolas Sarkozy hosting Tibet's spiritual leader the Dalai Lama.

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