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Despite widespread rumors about appreciation of Chinese currency, Renminbi (RMB) yuan, a noted Chinese economist said he believes the exchange rate of RMB will remain stable in the short term.
At an economic forum in southwest China's Chongqing Municipality, Lin Yifu, a professor at the Beijing University, warned people against blindly speculation in RMB.
"The yuan should maintain a stable exchange rate in the short term, though it is certain to revalue in the long run given the robust development of the Chinese economy and roaring productivity," said Lin, director of China Center for Economic Research of Beijing University, in an exclusive interview with Xinhua during the 2005 Annual Conference of Chinese Economists Society.
The three-day event closed on Sunday.
"A well-managed floating exchange rate has proven favorable to the developing countries," he said.
The yuan is currently pegged at 8.28 to one US dollar and China has come under pressure from trade partners, mainly the United States and the European Union, for changing an exchange rate that is seen as giving its exporters an unfair advantage.
But Lin said the US trade deficit will not go down even with yuan's appreciation because the essential causes of the trade deficit are low savings rate, high overdraft and financial deficits of the US government.
"If the RMB appreciates in value, the US will either pay more to buy Chinese products or turn to other exporting countries where labor costs are lower," he said.
US Federal Reserve Chairman Alan Greenspan admitted on Thursday that there is "no credible evidence" US manufacturing activity or US factory jobs would be helped by China revamping its currency system.
On the other hand, Lin said China should not yield to external pressure to revalue its own currency in a hurry. "The exchange rate system reform should accord with China's domestic conditions," he said.
Chinese Premier Wen Jiabao told European finance officials on Sunday it is the "common understanding" around the world that every country is entitled to choose the exchange rate mechanism and policy suitable to its own national conditions.
"Keeping RMB exchange rate basically stable at a reasonable and balanced level is in the interests of economic development not only in China but also in neighboring countries and region as a whole, and contributes to world financial stability and expansion of trade," Wen said in his keynote speech at the opening ceremony of the Sixth ASEM Finance Ministers' Meeting.
(Xinhua News Agency June 28, 2005)
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