* Wen says yuan not undervalued
* U.S. criticism of China"s yuan policy intensifying
* Blames U.S. for recent bilateral tensions
* Wen sees possibility of global double dip recession (Adds Wen"s comments on China-U.S. relations, dollar)
By Benjamin Kang Lim and Langi Chiang
BEIJING, March 14 (Reuters) - Chinese Premier Wen Jiabao onSunday spurned foreign calls for the yuan to rise and showed nolet up in scolding the United States over recent bilateraltensions.
Wen said calls from the United States and other bigeconomies for China to lift the value of its yuan currency wereunhelpful, even protectionist, and vowed that Beijing willsteer its own way on currency reform through a risk-filledeconomic landscape.
"We oppose mutual accusations between countries, and evenusing coercion to force a country to raise its exchange rate,because that"s of no help to reforming the yuan exchange rate,"Wen told a two-hour news conference at the end of China"sannual parliament meeting.
"We don"t believe that the yuan is undervalued."
Blending his trademark folksy tone with a prickliness bornof leading the world"s fastest-growing major economy, Wen usedthe keynote event to both cast China as a benign political andeconomic power and as the victim of unfair internationaldemands.
The United States, the European Union and others have longbeen critical of China"s yuan regime. Many U.S. lawmakerscomplain China"s currency is undervalued by as much as 40percent, undercutting the competitiveness of U.S. products.
The risks of deepening economic tensions between Washingtonand Beijing now hinge on a decision by the Obama administrationabout whether to call China a "currency manipulator" in asemi-annual Treasury Department report due out on April 15.
Adding to the pressure, U.S. Senator Charles Schumer saidon Friday that he plans to move forward legislation aimed atstopping China from "manipulating" its currency.
REBUFFS EXTERNAL PRESSURES
Without directly mentioning the United States, Wen madeclear that Beijing was in no mood to surrender to any demandsfrom Washington and might even be girding for a fight.
"I can understand some countries" desire to raise exports,but what I do not understand is depreciating one"s own currencyand attempting to pressure others to appreciate, for thepurpose of increasing exports. In my view, that isprotectionism," he said.
However Wen pressed Beijing"s own worries about Washingtonpolicy, as he did at last year"s news conference
"We are very concerned about the lack of stability in theU.S. dollar. If I said I was worried last year, I must say I amstill worried this year," said the premier, in the precise,school master-like tone that has helped earn him the nicknameamong Chinese of "Grandpa Wen."
China is the world"s biggest holder of U.S. Treasury debt,holding $894.8 billion worth.
"We cannot afford any misstep, no matter how slight, in ourinvestments. U.S. debt is guaranteed by the U.S. government, soI hope that the United States will take concrete steps toreassure international investors," he said.
Beijing and Washington have also recently been at odds overnew U.S. arms sales to Taiwan, the self-ruled island Chinaclaims as its own territory, and Obama"s meeting in the WhiteHouse with the Dalai Lama, the exiled Tibetan leader reviled byBeijing.
"The responsibility for the serious disruption inU.S.-China ties does not lie with the Chinese side but with theU.S.," Wen said in answer to a question about their ties.[ID:nTOE62D00W]
DOMESTIC WORRIES WEIGH
Wen also stressed that domestic worries weighed on policy.
"I have said that if there is inflation, plus unfair incomedistribution and corruption, they will be strong enough toaffect social stability and even the stability of the state"spower," he said. "It will be an extremely difficult task for usto promote steady and fast economic growth, adjust our economicstructure and manage inflation expectations all at the sametime."
The ruling Communist Party has sought to use the Party-runparliament to promote plans to raise welfare spending forfarmers and other poorer citizens, even as the governmenttightens its belt after a burst of feverish spending last year.
But the parliament meeting has coincided with the releaseof data suggesting China faces inflationary pressures thatcould require more intensive policy tightening.
China escaped the worst of the global slump by ramping upcredit, slashing interest rates and launching a 4 trillion yuan($585 billion) infrastructure stimulus programme in late 2008.
Its economy grew 8.7 percent last year as a result, by farthe fastest pace of any major country. But price increases havefollowed in the wake of that burst of spending and easy credit.
Consumer price inflation rose to 2.7 percent in the year toFebruary from 1.5 percent in the year to January, spurting to a16-month high. Rising housing prices have also stoked domesticdisquiet. The government wants to limit inflation for the wholeyear to 3 percent.
More domestically driven growth, led by consumers moreconfident about their healthcare, incomes and welfare, isneeded to keep the world"s third-biggest economy growing at asolid pace, Wen told the parliament on its opening day on March5.
Wen unveiled rises of 8.8 percent on social spending and12.8 percent on rural outlays, more than the rise of 7.5percent in the military budget, to narrow the wealth gapeconomists blame for dampening domestic consumption. (Additional reporting by Chris Buckley, Aileen Wang, SimonRabinovitch, Lucy Hornby and Emma Graham-Harrison, Yu Le, HuangYan, Liu Zhen; Editing by Ken Wills and Kazunori Takada)
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