The international pressure to revalue the yuan is becoming more
an issue of political concern than of economic significance,
according to several top economists who contend that China should
maintain the current exchange rates for renminbi.
Robert Mundell, a famed 1999 Nobel laureate in economics, said
over the weekend, "There's never before in history (been a
situation) that international monetary authorities ... try to
pressure a country with an inconvertible currency to appreciate its
currency."
Mundell was speaking to the forum of fast-growing enterprises
and financial markets with the Sixth Beijing
International High-Tech Expo.
The Columbia University professor said that China should not
appreciate or devalue the renminbi in the foreseeable future.
"Appreciation or floating of the renminbi would involve a major
change in China's international monetary policy and have important
consequences for growth and stability in China and the stability of
Asia," Mundell said.
Experts at the forum shared Mundell's view that there is no
convincing evidence that China should alter its yuan policy at the
moment.
Fred Hu, managing director of Goldman Sachs (Asia), told the
forum that the yuan is not central in tackling the main problems
facing the world economy today.
According to Hu, China's economy, despite its rapid growth,
accounts for a meagre 3.5 percent of the global gross domestic
product (GDP). Even the remarkable annual foreign direct investment
(FDI) inflows to China are not determined by an "excessively
undervalued" currency as some people suspect, but rather by the
country's attractive domestic market and growth fundamentals, Hu
said.
Experts said that China's trade surplus, a key target in the
criticism of the yuan policy, has actually little direct link with
the exchange rate.
"China's recent export performance has been truly spectacular,
but it is primarily driven by the country's decade-long trade
reforms, dynamic private enterprises, abundance of cheap labor and
most importantly, multinational companies' growing processing and
assembly operations in China," said Hu.
The country's exports have consistently outperformed throughout
the highs and lows of the yuan, according to experts at the
conference. They added that the export boom has persisted even
during the turbulent years of Asia's financial crisis, when there
was pressure for the yuan to be devalued.
Zhu Min, a senior adviser with the Bank of
China, said that the pressure for renminbi to appreciate does
exist, mostly because the short-term speculative "hot money" of
some US$20 billion-30 billion sneaked into China in the year's
first half as speculators bet on the yuan's sharp appreciation.
(China Daily September 15, 2003)