Opinion

Yuan appreciation no solution to world trade imbalance

(Xinhua)
Updated: 2010-02-25 13:40

JOHANNESBURG: It is unfair to attribute the world trade imbalance to the role of the Chinese currency and appreciation of the yuan is no solution to the problem, South African economists said Wednesday.

It is unwise, too, to demand a sharp appreciation of the yuan amid world economic recovery, John Lowes, an economist with South Africa's First National Bank, said in an interview with Xinhua.

He said that such a move would compromise both the Chinese and the world economies.

If the Western countries ignore China's contribution to the world economy and force it to appreciate its currency, the Chinese economy could end in a downturn, and the Western countries are bound to suffer heavy losses, he added.

He applauded the contribution of yuan's stabilization to the global economic recovery during the international financial crisis.

Lowes said that even if China appreciates its yuan, it didn't mean the US trade deficit would be lowered, and it was very likely the United States would buy from others instead of China.

He also denied links between China's current trade surpluses and the role of the yuan. Actually, there is no scientifically viable assessment on whether a currency is undervalued, he said.

According to Lowes, China's trade surplus since 2005 has been a result of over-consumption in the United States.

Meanwhile, South African economist David Rute said that the global trade imbalance has been caused by the unreasonable economic structures of the world's major developed countries.

He criticized what they have done in trying to influence China's long-term economic strategy, and blasts argument that "underestimation of yuan" is trade protectionism.

He spoke highly of China's measures in narrowing its currency exchange rate floating range, which has proved to be an effective way to overcome the crisis.

Ever since the international financial crisis broke out in 2008, China has dealt with it in a steady manner and revived its economy in a relatively short period, he said. The "China Engine" has made a crucial contribution to the world economic recovery, he said.

Rute said that the sustainable development of the Chinese economy would benefit the entire world, and he would like to see a stronger yuan in the future.