French President Nicolas Sarkozy used a state visit to China on Monday to publicly urge President Hu Jintao to let the yuan rise more swiftly against Europe?s single currency. The European Union (EU) has been ratcheting up pressure on Bejing to correct what it sees as the Chinese currency?s unfair undervaluation, but Sarkozy eschewed all diplomatic niceties by urging Hu to his face to take action. «We need to arrive at currency rates that are harmonious and fair,» Sarkozy said at a joint media appearance. China, he said, should «accelerate the appreciation of the yuan against the euro». Hu stood impassively as he listened to Sarkozy, who also said China had growing global responsibilities on issues such as the environment.

While the Chinese currency has climbed nine percent against the dollar since its landmark 2.1 percent revaluation in July 2005, it has fallen about 11 percent in total against the euro. The euro?s strength is causing growing consternation in the EU, whose trade deficit with China is soaring. Despite worries that the euro is denting Europe?s competitiveness, plane maker Airbus clinched its largest order to date when China signed a framework agreement to buy 160 planes worth $17 billion before discounts. The order topped a contract last year from China to buy 150 aircraft.

In addition, China agreed to take a five percent risk-sharing stake in the development of the A350. The $10 billion project is Airbus?s attempt to catch up with Boeing?s 787 Dreamliner in the fast-growing mid-sized jetliner market. French state-owned nuclear energy group Areva also signed an eight billion euro ($11.86 billion) deal with China for two nuclear reactors and more than a decade of fuel. Areva, which said the value of the contract was a record for the global nuclear industry, has asked to be paid partly in euros to protect itself against the fall in the dollar, Chief Executive Anne Lauvergeon said. She said this was a first for a major deal with China.

Louis Gallois, Chief Executive of Airbus?s parent company, EADS, said the orders for the 160 aircraft ? 110 single-aisle A320s and 50 twin-aisle A330s ? should be confirmed before the end of the year. On top of that contract, Airbus said China Southern Airlines Co Ltd had bought 10 twin-aisle A330 aircraft in a deal worth $1.8 billion at list prices. Earlier, Gallois told Reuters that the strength of the euro could lead to a massive increase in outsourcing of production to lower-cost countries if it was not reined in.

Airbus sells its planes in dollars but close to half of its costs are in euros. «It is a vital danger, which means it is eating the margins of the company, but it is not an immediate one,» Gallois told Reuters. The single currency, used by 13 of the EU?s 27 member states, reached a record high against the dollar last week, prompting EADS head Tom Enders to declare that the weak U.S. currency posed an existential threat to the plane maker.

A high-powered EU delegation is due in Beijing on Tuesday to further hammer home the message that Beijing needs to let the yuan climb not only to ease global trade imbalances but also to cool its economy and tamp down inflation. Jean-Claude Juncker, the chairman of the Eurogroup of finance ministers, said last week that the yuan was now undervalued by 20 to 25 percent, handing China an unfair trade advantage. Sarkozy said he had accepted an invitation by Hu to come to the Olympic Games in Beijing next August. «Allow me to admit something. It was not a big effort for me to accept your invitation. Because if you hadn?t invited me, I would have come anyway,» the French president said.

Source : Reuters