Podcast
Sudden yuan change poses risks
Updated: 2010-04-09 13:18
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An abrupt and bold step to raise the value of the Chinese currency will not benefit China, the United States or the global economy, but may increase inflation risks in Asia, Xia Bin, a newly appointed member of the central bank's Monetary Policy Committee, said on Thursday.
"China's current exchange rate helps it recover at a rapid and sustainable level, which in turn has largely contributed to the recovery of the global economy," Xia said at the Halter Financial Summit in Shanghai on Thursday.
A quick appreciation of the yuan would do little to resolve the large trade deficit and high unemployment rate in the US, he said, adding that the cooling of the Chinese economy from a rising rate would hamper global recovery and consumers in the US because of the climbing costs of goods.
The People's Bank of China, the nation's central bank, appointed economist Xia Bin, along with Li Daokui and Zhou Qiren, as new members of its monetary policy committee in March.
According to Xia, China's effective exchange rate cumulatively jumped by 14.5 percent from September 2008 to February 2009, indicating that the yuan is not very undervalued in such economic conditions.
But he said that China should resume the "managed floating exchange rate" in the short-term given the large size of its economy.
China abolished the yuan's peg to the dollar in July 2005, linking the rate to a basket of currencies, but repegged it to the greenback in July 2008 during the global financial crisis.
"It's completely unrealistic for China at this stage to have a fully flexible exchange rate," said Pieter Bottelier, economist and former chief of World Bank's Resident Mission in China.
（中國日報網英語點津 Helen 編輯）
About the broadcaster:
Nelly Min is an editor at China Daily with more than 10 years of experience as a newspaper editor and photographer. She has worked at major newspapers in the U.S., including the Los Angeles Times and the Detroit Free Press. She is fluent in Korean and has a 2-year-old son.
