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It will not be necessary for China to increase the value of its currency unless the US dollar falls dramatically, according to comments made by Stephen Roach, the chief economist for Morgan Stanley, at the China Development Forum which closed earlier this week.
Roach has clearly adjusted his view on China's exchange rate policy since last year when he said that China had initiated global deflation and that the under-valued Renminbi gave China a low-price advantage to gain a surplus against its trading partners.
A stable exchange rate is one of the elements of China's macro-economic policies that has been working for many years; the policies also include the principle of expanding domestic demand, a pro-active fiscal policy and a prudent monetary policy.
With these macro-economic policies, China has maintained a high gross domestic product growth rate for the past few years despite the sluggish global economy.
However, questions and accusations relating to China's economic policies continue: China will be unable to manage its growing fiscal debt and deficit; China's economic policies lead to global deflation; and the Chinese government should increase the value of the RMB.
Following the Asian financial crisis, many economists predicted that the Chinese economy would collapse, but when the global economy began to slump, they reversed their course, saying that a strong Chinese economy will pose a serious threat to the world.
The advancement of China's reforms and development has changed the views of many. Roach said it has proven that China is extraordinarily capable of adjusting its fiscal policy to suit the changing situation, and criticism from other countries can be disregarded. It is China, with its steady currency over the past five years, that has helped pull the Asian economy out of its financial crisis.
Frederic Langer, head of the China and Asia Programs Unit Center for Cooperation with Non-Members of the Organization for Economic Cooperation and Development (OECD), said that it is necessary for China to pursue a pro-active fiscal policy characterized by expanding investment in infrastructure construction.
Chinese policies, including the reform of government agencies, the improvement of the social security system and increasing investment in the education and science sectors, are on track, Langer said.
Tae-Joon Park, honorary chairman of Pohang Iron & Steel Co. Ltd., says that Chinese leaders understand China's economic conditions very well and the economic policies they have implemented are both practical and meticulous.
Many economists are fond of citing the many business opportunities in China and the contribution China has made to the regional and global economies. British economist Patrick Minford said, during his recent trip to China, that the country's fast economic growth has increased its demand for services and high-tech products, which is a driving force behind global trade and economic growth.
Decisions made at the first meeting of the 10th National People's Congress, which concluded on March 18, indicate that China's new government will persist in these macro-economic policies, making adjustments according to changing conditions.
Tadao Chino, president of the Asian Development Bank, said that, based on the Chinese government's determination to reform and its excellent performance in macro-economic control, he firmly believes that China will overcome various challenges and maintain a seven percent annual GDP growth in the coming 15 to 20 years.
(Xinhua News Agency March 29, 2003)
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