From Chinese Press

More flexible RMB exchange rate helps reduce China's economic risks

(Xinhuanet.com)
Updated: 2010-06-22 10:38

More flexible RMB (yuan) exchange rate helps reduce China's economic risks, said a Japanese scholar in a written interview with Xinhua Monday.

Takashi Sekiyama, an assistant professor of Meiji University, made the remarks in response to questions regarding the reform of the RMB (yuan) exchange rate regime.

The decision to further promote the reform of the RMB (yuan) exchange rate regime was made out of consideration for the needs of China's economic development rather than giving in to the pressure exerted by the U.S. government, said Sekiyama.

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"At a time when the debt crisis in Europe has brought more turbulence in the foreign exchange market worldwide, it poses more risks if the RMB continues to be pegged to the U.S. currency," he said, adding that any delay in enhancing the flexibility of the RMB will inevitably increase risks to China's economy.

"The timing of the decision to increase the RMB's flexibility is convenient as it helps minimize the nation's economic risks as well as avoid China's unnecessary conflicts with the rest of the world," he said.

"In the short term, the appreciation of the RMB will boost imports, but will have an adverse effect on exports," said Sekiyama. "And the consumers will benefit from a fall in prices of imported resources, food and other commodities."

"In the long run, however, a stronger yuan will facilitate the adjustment of China's industrial structure, improve enterprises' current technologies and enhance their competitiveness," said the scholar.

Sekiyama noted that the exchange rate is not the only factor that determines the competitiveness of export-oriented enterprises.

"Most importantly, in line with the inevitable trend of the yuan's appreciation in the long run, enterprises need to do their utmost to cut costs and advance their technologies," he said.

Concerning the reform's impact on Japan's economy, Sekiyama said that when the RMB began to go stronger in July 2005, there were market concerns that the Japanese yen, which was closely related to the Chinese economy, would witness a sharp rise accordingly.

"But it didn't," he said.

"In the following three years, the yuan's appreciation did not have a great influence on Japan's imports from China or the exports of China-based Japanese enterprises to a third country," he said.

"Based on what we have learned from the past, the reform of the RMB exchange rate regime will not greatly affect the Japanese economy," the scholar predicted.