Mar 29, 2010 Time is ripe for China to revalue yuan: World Bank chief
World Bank President Robert Zoellick said Monday that it was timely for China to revalue its currency, amid US criticism that Beijing was deliberately keeping the yuan down to gain a trade advantage.
He said that as export-driven China remakes its society to depend more on consumer spending, it could become an opportunity to revalue the currency.
Zoellick told Wall Street Journal Online that aside from increasing the purchasing power of ordinary Chinese people, an appreciating currency would also send a signal to local firms to focus future investment and capacity more toward domestic demand rather than producing for export.
"People who focus on structural explanations say a quick change in currency appreciation is not going to lead to automatic shifts in industrial structure," he said.
"That's correct, but it's also fair say that a price change" -- an appreciating currency -- "would signal the changes you have to make in industrial structure."
The United States, Europe and international economic institutions have long been pressing China to revalue its currency, saying it was in China's interest to do so.
Some experts believe the yuan is undervalued against the dollar by up to 40 percent. The United States and China's other trading partners claim that it gives the Asian giant an unfair trade advantage by making Chinese exports cheaper.
Last week, a group of 130 Democratic and Republican lawmakers called on US Treasury Secretary Timothy Geithner to brand China a currency manipulator in a semi-annual report to be released by April 15, saying Beijing was in effect subsidizing exports.
In addition, US senators unveiled legislation that would impose tough new penalties on China if it failed to revalue its currency.
The legislation, which enjoys support from both sides of the political aisle, would punish currency manipulation as an unfair subsidy and could trigger retaliatory US action.
Chinese Premier Wen Jiabao has said that Beijing would resist any foreign pressure for a stronger yuan.
"We are opposed to the practice of engaging in mutual finger-pointing among countries or taking strong measures to force other countries to appreciate their currencies," Wen said.
World Bank President Robert Zoellick said Monday that it was timely for China to revalue its currency, amid US criticism that Beijing was deliberately keeping the yuan down to gain a trade advantage.
He said that as export-driven China remakes its society to depend more on consumer spending, it could become an opportunity to revalue the currency.
Zoellick told Wall Street Journal Online that aside from increasing the purchasing power of ordinary Chinese people, an appreciating currency would also send a signal to local firms to focus future investment and capacity more toward domestic demand rather than producing for export.
"People who focus on structural explanations say a quick change in currency appreciation is not going to lead to automatic shifts in industrial structure," he said.
"That's correct, but it's also fair say that a price change" -- an appreciating currency -- "would signal the changes you have to make in industrial structure."
The United States, Europe and international economic institutions have long been pressing China to revalue its currency, saying it was in China's interest to do so.
Some experts believe the yuan is undervalued against the dollar by up to 40 percent. The United States and China's other trading partners claim that it gives the Asian giant an unfair trade advantage by making Chinese exports cheaper.
Last week, a group of 130 Democratic and Republican lawmakers called on US Treasury Secretary Timothy Geithner to brand China a currency manipulator in a semi-annual report to be released by April 15, saying Beijing was in effect subsidizing exports.
In addition, US senators unveiled legislation that would impose tough new penalties on China if it failed to revalue its currency.
The legislation, which enjoys support from both sides of the political aisle, would punish currency manipulation as an unfair subsidy and could trigger retaliatory US action.
Chinese Premier Wen Jiabao has said that Beijing would resist any foreign pressure for a stronger yuan.
"We are opposed to the practice of engaging in mutual finger-pointing among countries or taking strong measures to force other countries to appreciate their currencies," Wen said.
AFP Global Edition
