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Revaluing yuan now would 'jeopardize' recovery: US expert
(Xinhua)
Updated: 2009-11-23 11:16
Nobel economics laureate Paul Krugman's recent push for a stronger Chinese currency "was wrong," and such a move currently does no good to the US and Chinese economies, a US expert said recently in an article on Forbes' website.
Shaun Rein, founder and managing director of the China Market Research Group, a strategic market intelligence firm, said that revaluing the Chinese yuan right now would "jeopardize the world's fledgling economic recovery."
Krugman, who is also The New York Times columnist, wrote recently in an article headlined "World Out of Balance" that China severely undervalued renminbi, and he called on the US government to push for a stronger Chinese currency.
Citing Krugman's view that China needed to strengthen the yuan to reduce America's trade deficit and spur worldwide recovery, Rein argued that "it is better for American businesses, for China to maintain current yuan rates until the worldwide recovery is on a firmer footing."
He stated that if the renminbi were to appreciate, billions of dollars of purchasing power would be taken from American consumers, which he said satirically would not make the upcoming holiday season "such merry time."
With the US unemployment rate standing at 10.2 percent, the worst in more than 26 years, American consumers are already stretching their shopping dollars farther than they have in a long time, he wrote.
Regarding the impact of a stronger yuan on China, which is not immune from the ongoing global financial crisis, Rein said that even a small currency appreciation would cause thousands more factories to shut down and leave millions more unemployed.
"That wouldn't be good for China or anybody else," he said, warning that the possible crisis in the Chinese economy would affect American exports to China.
"Even if China's currency were to appreciate, production would just move to cheaper countries like Vietnam, not back to America," he added.
"Unless there are structural reforms to America's economy, a stronger renminbi will not lower the trade surplus in any meaningful way," he stressed.
Rein further pointed out that the biggest currency problem in the world right now "is not a weak yuan but a weak dollar".
A weak dollar is dangerous "because it means countries will be less likely to buy Treasury bills and finance America's recovery," Rein said.
"A weaker dollar won't help create more exports. It will just make things more expensive for Americans," because he said that foreign companies would turn to other low-cost labor markets like Vietnam.
In his article, Rein also urged the administration of President Barack Obama to focus on how to strengthen the dollar by paying down debts, instead of "wasting time" on the renminbi issue.
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Coincidentally across the Atlantic Ocean, a business commentator from British renowned newspaper Daily Telegraph wrote an article on the Chinese currency, expressing a view similar to that of the US expert. The article was headlined "It's time to stop beating China up over its currency" and posted?on the website of the Daily Telegraph.
Jeremy Warner argued against the Western press which he said unites against China's approach to currency reform and showed much sympathy for the Chinese point of view.
Regarding the revaluation of the reminbi, Warner said it is perfectly reasonable for China to do it at its own pace. "Beijing dare not go faster to appreciate its currency because the internal demand is sharply growing."
"The West has enjoyed a free ride off the developing world for an awfully long time," he said, calling for rebalancing geo-political and economic power for the sake of the whole world and the next generation.
