Euro area policymakers pressed China on Tuesday for a faster appreciation of its currency to help rebalance the world economy but said Chinese Prime Minister Wen Jiabao had differed with them.
The chairman of euro zone finance ministers, Jean-Claude Juncker, told a news conference after talks with Wen in Brussels: "China's real effective exchange rate remains undervalued."
He said the 16-nation European currency area had urged an "orderly, significant and broad-based appreciation" of the yuan.
Asked how Wen had responded, Juncker said the message came as no surprise to the Chinese delegation, but added in French: "The Chinese authorities do not share our view."
The United States and the European Union accuse China of keeping the yuan artificially low to boost exports, undermining jobs and competitiveness in Western economies.
Wen did not attend the news conference. On Monday, he told the opening session of an EU-Asia summit that China's objective was to ensure relative stability of the major reserve currencies.
However, after President Nicolas Sarkozy met Wen later on the sidelines of the summit, a French source said China seemed ready to discuss how to avoid "erratic" exchange rate variations.
The annual EU-China monetary dialogue came amid fears of a global "currency war" as key trading powers, such as the United States and Japan, seek to weaken their currencies while emerging economies such as Brazil and South Korea raise or threaten tougher controls to limit capital flows.
Europeans are worried that they will be saddled with an overvalued currency, stifling their recovery, because they have few tools to contain the euro's rise, even if they wanted to.
France, which takes over the presidency of the Group of 20 major economic powers next month, has put reforming the international monetary system at the top of its agenda, hoping to draw China into multilateral talks on currency coordination.
"It is not appropriate at this point in time that China is never involved in discussions about currencies," French Finance Minister Christine Lagarde told a forum in Moscow on Tuesday.
Sarkozy told the EU-Asia summit on Monday that monetary imbalances were a risk to the global economy and the Group of Seven wealthy industrial countries was no longer the legitimate forum to discuss currencies.
Juncker said the euro area welcomed China's June 19 decision to make the yuan's exchange rate more flexible, but that policy had not yet been sufficiently turned into reality.
He and European Economic and Monetary Affairs Commissioner Olli Rehn both said Wen had reaffirmed China's commitment to the flexibility decision.
However, European Central Bank President Jean-Claude Trichet told the same news conference: "We noted that the evolution in terms of effective exchange rates, and also vis-a-vis the euro, were not exactly what we would have hoped ourselves."
Since Beijing scrapped a peg to the dollar on June 19, the renminbi has gained 2.15 percent against the U.S. currency but weakened 9.4 percent against the euro.
EU Trade Commissioner Karel de Gucht told French newspaper Le Monde the yuan's undervaluation was a factor in trade flows. "It is not the only problem in our trade relations, but it is one of them," he was quoted as saying.
Trichet welcomed Wen's offer on a weekend visit to Greece to buy Greek government bonds when debt-stricken Athens, which received a 110 billion euro ($151 billion) IMF-euro zone rescue package in May, returns to capital markets.
On the sidelines of the EU-Asia summit, German Chancellor Angela Merkel threw her weight behind French demands to clamp down on commodity speculation, pledging her full support on Tuesday for the initiative from Paris.
France has promised to put regulating derivatives trading in commodities from grain to gas on its G20 agenda.
"We have very volatile commodity prices and so I would fully support that we should tackle this subject," Merkel told reporters.
The 48 European Union and Asian leaders were due to pledge in a joint final statement on Tuesday to boost domestic demand and investment through a gradual liberalization of internal and international markets.
"As a first priority, the demand for goods and services as well as investments have to be encouraged since they are the drivers of economic growth and job creation across countries," the draft statement obtained by Reuters on Monday said.
"To this effect, the progressive liberalization of domestic and international markets must be pursued."
Chinese concerns about Europe were reflected in a passage in which leaders pledge to move away from "patterns that created fragilities in the pre-crisis period, including excessive public deficits, non-sustainable debts and development gaps."
(additional reporting by Jan Strupczewski, David Brunnstrom and John O'Donnell; writing by Paul Taylor, editing by Mike Peacock)