Under pressure over China’s currency policy, Wen Jiabao tried to scare his European audience on Wednesday, warning that a sharp appreciation in the renminbi would “be a disaster for the world”. However, Wen’s speech would have been more alarming for the European executives and politicians present if he had made a different case.

The Chinese premier was speaking in Brussels during a week-long trip to Europe which has coincided with mounting international criticism of China’s efforts to curb the value of the renminbi. He argued that hundreds of thousands of migrant workers would lose their jobs if the currency jumped 20-40 per cent and that social chaos would ensue.

It is certainly true that there are large numbers of Chinese exporters operating on relatively slim margins which would struggle to absorb a dramatic hike in the value of the Chinese currency. Many are already facing rising wage bills and the prospect of moving to a cheaper country or inland from China’s coastal regions (see analysis).