Experts Call for Rational Evaluation of Chinese Yuan

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Last updated at: (Beijing Time) Tuesday, August 12, 2003

Experts Call for Rational Evaluation of Chinese Yuan

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Economists are calling for a rational evaluation of the Chinese yuan (RMB) currency amid an international debate on its true value, and pressure from some of China's trading partners for the government to revalue the currency.

Wei Jianing, a researcher from China's Development Research Center of the State Council, said fears that the RMB was undervalued, and having a negative influence on foreign trade, were unfounded.

"The RMB is not the major contributor to either worldwide deflation or sluggish exports of some industrial countries."

There was no comparison with Japan in the mid-1980s before theappreciation of the Yen, when Japan's gross national product (GNP)was 10 percent of the world total and the trade surplus over 100 billion US dollars, he said.

China's gross domestic product (GDP) last year was just 3.28 percent of the world total and the trade surplus 30.4 billion US dollars, said Wei.

Chinese exports, produced using low-tech and labor-intensive manufacturing methods, accounted for only 4.3 percent of industrialized countries' consumption in 2001, and could not possibly cause world deflation.

Xiao Geng, professor from the School of Economics & Finance of University of Hongkong, described China's role in the world manufacturing industry as a labor and market provider that was still learning.

He said revaluation of the Chinese yuan would not benefit countries pressing for appreciation, because China's competitive export advantage was based on the "infinite supply of cheap labor rather than cheap currency."

Morgan Stanley global chief economist Steven Roach also predicted in May that China's exports would lose almost no market share if its currency appreciated 10 percent.

Lu Hongjun, president of the Shanghai Institute of International Finance, said appreciation pressure reflected the global strategies of western industrialized countries, especially the United States and Japan.

He said revaluation of the Chinese yuan would surely have a severe negative impact on the Chinese economy, harm the interests of domestic and overseas companies in China, and affect the development of neighboring countries and the whole world.

Recently, the Chinese government has said several times that itwould retain the stability of the RMB exchange rate.

Wei suggested that the Chinese government should beware of international speculators, and seek the proper time to promote the reform of its foreign currency management system and adjust the exchange rate policy.

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