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China should step up RMB internationalization

By Jiang Lurong, Wu Xintao (Xinhua)

08:15, May 09, 2013

LONDON, May 8 (Xinhua) -- China should push forward internationalization of its currency RMB and development of the financial market in a bid to minimize the negative impact of easing competition of advanced economies, said Jim O'Neill, founder of the BRIC theory, in an interview with Xinhua before the Group of Seven finance minister and central bank governors meeting this Friday.

He believed that the exchange rate of the Chinese currency RMB, or yuan, is to fluctuate, going up and down, just like another currency.

O'Neill, former chairman of Goldman Sachs Asset Management who made surprise announcement of leaving the bank in February, said London, as a global financial center, will see increasing trade in RMB in the future, so long as the European regulators are wise enough.

"China needs to develop domestic financial market further," O'Neill suggested, predicting that China to fully open its financial market in the next few years.

"I think it's a very exciting thing," he said.

In response to a question on China's economy, he predicted the economic growth in China will slow down from the previous years' high-speed growth like 8 percent or 7.9 percent.

China's economic growth will maintain at about 7.5 percent in this decade, he predicted.

He held that China's economic growth mode is expected to gradually turn to be more oriented by domestic demand, with demand for fossil energy dropping while renewable energy rising.

He pointed out the biggest risk facing China is that Chinese consumers do not tart to spend more, which is also the problem in the rest of the world.

Another risk listed by O'Neill is the weak exports.

"The reasons for China's lower growth rate were structural and cyclical in nature. It was a planned downturn, mainly due to concerns about overheating and inflation. During the last quarter China already did better again, coming out of its trough," O'Neill noted.

O'Neill admitted that the rapid development of the BRIC countries have exceeded his expectations.

"The BRIC countries have the potential to avert a global recession and to grow faster than the rest of the world and to pull all of us along with them as a (growth) engine," he said.

When asked about his next job after Goldman Sachs, the 55-year-old economist used his sense of humor and said: "If the sun's continuing shinning, my next plan is to go sun bathing and do nothing else."

But he disclosed that he would do something else late this year.

In another interview with local media, O'Neill was suggest to start a second career as secretary general of the BRICS countries.

O'Neill said this proposal is one of the more interesting ones among a few offers he received recently. "I don't know whether the heads of the BRICS countries want to create such a post," he said.

O'Neill became well-known in 2001 for a paper in which he was the first to coin the acronomyn BRIC, for the rapidly developing nations of Brazil, Russia, India and China, which he predicted would be the great economic powers of the future. More recently, South Africa has also been frequently named as belonging to this circle.

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