The importance of the exchange rate of the Renminbi (RMB), the Chinese currency, has largely been overstated, said Kevan Watts, chairman of Merrill Lynch International Inc., Tuesday.
Watts and some other internationally-renowned experts made comments on the issue of the RMB exchange rate when addressing Understanding China's Capital Markets, a general session of the 2005 Beijing Fortune Forum.
Many speakers at the forum held that the current pressure from the United States on China to adjust the exchange rate of the RMB is more of a political matter than an economic one. Economically, it's hard to say to what extent a revaluation of the RMB would help the United States cut its trade and fiscal deficits.
Stuart T. Gulliver, chief executive of corporate, investment banking and markets of HSBC, said that the US trade with China represents only 10 percent of its total trade. If China was to revaluate its currency, hypothetically by 25 percent, it would only improve the US dollar on a trade-weighted basis by about 2.5 percent -- not enough to solve the US trade problem.
He said that the timing for changing the currency exchange system should be when the Chinese authorities feel it's right to make that decision. It should be carefully sought out and done in a very measured way.
When asked by the press about the danger for China to adjust its exchange rate, Gulliver said that the danger would be that any straightforward change against the US dollar would not be seen as enough by the market, and would bring in renewed speculation.
(Xinhua News Agency May 17, 2005)
