Wen defends China's exchange rate policy

China's premier Wen Jiabao yesterday mounted a vigorous defence of the country's exchange rate policy, in Beijing's highest-level response to criticism by the Obama administration.

Speaking in Berlin after talks with Angela Merkel, Germany's chancellor, he insisted Beijing's policy for the renminbi was "orientated towards market needs" and "flexible".

Mr Wen's defence of China's currency regime followed last week's move by Tim Geithner, US Treasury secretary, to break a long-standing taboo and to accuse China of manipulating its currency to support exports.

Yesterday, Joe Biden, US vice-president, said the administration had as yet not decided whether to name China as a currency manipulator formally, a decision that requires Washington to open negotiations with Beijing over exchange rates.

"We're not going to impose on [China], or attempt to impose on [China], restraints that benefit our economy inconsistent with international trade agreements that exist," Mr Biden told CNBC.

But he added: "The policy of this administration is to say to China, which occasionally the last administration was reluctant to do, 'You're a major player on the world scene economically and you've got to play by the rules that everybody else plays by'."

The Chinese premier, who is on a European tour this week, said China would keep the renminbi at a "reasonable and balanced level".

Mr Wen andMs Merkel also pledged to work closely together to reform the global financial system and rejected protectionism "of any kind".