Revalued Yuan No Magic Solution

France's call for a revalued Chinese currency is not a magic solution to the European Union's trade gap with China.

France's call for a revalued Chinese currency is not a magic solution to the European Union's trade gap with China, EU Trade Commissioner Peter Mandelson said in an interview published on Wednesday.

New French President Nicolas Sarkozy has called on the European Central Bank to convince China to revalue the yuan against the euro.

But Mandelson said with the yuan undervalued by 50 percent even a sharp strengthening would not be enough.

"There is no doubt that the Chinese authorities should work to arrive at a more flexible regime for the currency," he said in an interview with Italy's Corriere della Sera and other European newspapers.

"There are neither technical nor political obstacles to act in this direction."

Asked if he was saying that Sarkozy's position was out of line, he said, "I'm saying that he is not offering a magic solution. The way to look at the Chinese challenge is to work on products, on production processes, on markets."

France also is calling for another extension of EU quotas on imports of Chinese textiles and clothing. Mandelson has opposed new quotas and has called for a double-monitoring system of import licences in the EU and export licences in China.

"It's necessary that Beijing spur free and correct trade, starting with dismantling domestic barriers to our imports," he said.

Mandelson added that Chinese barriers in textile trade alone had cut European exports by 20 billion euros ($27.62 billion) a year.

"That is simply unsustainable," he said.

Mandelson also defended his suggestion that the EU consider creating a "golden share" to protect strategic sectors from takeover by foreign state-controlled investment funds.

He said the European Commission would begin to discuss the idea in the fall.

Mandelson said power companies could become a target of the funds with the targeted separation of production from distribution networks.

"Is it proportionate to certify incoming foreign investment in EU infrastructure, to ensure it will abide by the terms of this legislation? I think so."