Economic Trend News
- Big yuan revaluation to kill China growth
Date: 22-Nov-2007 Sources: (Shenzhen Daily)
A BIG Chinese currency revaluation would invite speculation and damage growth, Fan Gang, a monetary policy adviser to the People's Bank of China, said yesterday.
Sharp increases in the yuan's value would trigger large speculative capital inflows and outflows that would kill China's growth and financial stability, Fan, a member of the central bank's monetary policy committee, said.
Group of Seven nations officials have increased pressure on China to allow the yuan to appreciate more and take the burden off other currencies.
'What would happen after a large - say 40 percent to 50 percent - appreciation of the yuan? Another request in two years,'' Fan said. He was referring to U.S. lawmakers' calls for bigger gains.
The yuan has climbed about 11.5 percent against the U.S. dollar since a fixed exchange rate was scrapped in July 2005.
The world's fourth-largest economy grew 11.5 percent in the third quarter as record trade surpluses pumped in cash. A stronger currency would make exports more expensive, staunch the inflow of money and ease tensions with trading partners.
The U.S. dollar was likely to keep falling, a problem for the yuan, Fan said. Central bank governor Zhou Xiaochuan said yesterday China supported a strong dollar.
The dollar has dropped to record lows against the euro and Canada's currency this month.
Fan underscored the potential cost to China in job losses from a currency revaluation, denied the yuan was responsible for global trade imbalances, and said the nation's priorities were long-term growth and stability.
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