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US Federal Reserve (Fed) Chairman Alan Greenspan said on Friday that the soaring trade deficits probably would not be helped by China revamping its currency system.
Answering questions following a speech he delivered to the Economic Club of New York, Greenspan said that a move by China to revalue its currency "probably quite unlikely" to reduce the US overall trade balance.
Greenspan said that that is because US companies are likely to turn to other countries, such as Thailand or Malaysia for goods, rather than US producers.
"So essentially what we will find is we're importing from a different area, but we will be importing the same goods," Greenspan said.
He also said that letting the Chinese currency move higher against the dollar would increase prices American shoppers pay for Chinese goods in the United States.
"The effect will be a rise in domestic price in the United States," he said.
The United States' trade deficit soared to a record high of 617billion dollars last year. The US government has been pressing China to stop linking its currency to the US dollar and instead move to a more flexible currency system in a bid to cut US trade deficit.
Chinese Premier Wen Jiabao said last Monday that China regards the reform of the exchange rate of Renminbi (RMB) as an issue of sovereignty and will never yield to any external pressure to change it.
(Xinhua News Agency May 21, 2005)
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