Yuan revaluation would hurt US: Lin

08:55, May 17, 2010      

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The chief economist for the World Bank said Saturday that if China were to revalue its currency it would actually hurt rather than help the US economy.

Speaking to students on China's role in the future global economy, Justin Yifu Lin said critics who claim a purposely undervalued Chinese currency is hampering US growth are wrong.

He acknowledged that if China stopped selling the yuan and buying foreign currencies, the policy that critics say keeps the currency artificially undervalued, Chinese exports would become more expensive.

But he said because most of the products China exports to the United States are labor-intensive goods US manufacturers stopped making years ago, the US would only have two choices: buy the products from other countries or from the Chinese.

Either way, Lin said, the cost of those goods would rise for US consumers and that would depress both consumer spend-ing and job creation in the US.

He argued that goods made in other parts of the developing world were more expensive than Chinese made goods because, if they were not, the US would already be buying them.

Many economists including some from the World Bank's sister organization, the International Monetary Fund, think revaluing the currency is just one of several steps China needs to take in order to shrink its massive reserves.

China would also need to adopt policies to encourage domestic consumption, such as improving health care and other social safety net services so that households would save less and spend more.

Source: Global Times


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