Exchange rate

An appreciation of the Chinese yuan will help the US economic growth but it won't solve the problems in its own economy, said the International Monetary Fund (IMF) chief economist Olivier Blanchard.

He noted that an appreciation by 20 percent of the yuan, or the Renminbi (RMB), along with a similar currency appreciation of other emerging Asian economies, may lead to an increase of about 1 percent of the US GDP.

"This would be good news for US growth, but this is clearly not enough, by itself to sustain growth in the United States," said Blanchard. "It's very important not to bash China over the RMB."

According to Pochmann, every country has its own right to define its exchange rate, thus it is up to each nation to establish a level considered more suitable.

"I think we all know by now that simply re-evaluating or devaluating the Chinese currency will be unlikely to fix the global imbalances or the current account deficit problems in the United States," said Park.

But for the sake of economic structural shift and for a sustainable growth in the long term, the Chinese currency probably will benefit from having more flexibility, he said.

Freeman, in this regard, dismissed the revaluation of RMB as the best way to address trade imbalances.

"That is only a small factor," he said, adding that what needs most is the economic structural change of China, the United States and Europe. For China, it's the change of focus from exports to domestic consumption, he said.

"That is a very long-term process. It is not going to happen in the next one or two years," Freeman warned.

(Xinhua News Agency March 9, 2010)