Chinese economy gave a wonderful performance: Nobel Laureate

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Last updated at: (Beijing Time) Saturday, November 08, 2003

Chinese economy gave a wonderful performance: Nobel Laureate

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Robert A. Mundell, a prominent figure in world economic circle finally made his appearance at the Danqing Pavilion of Zhuhai Holiday Resort after reporters waited there for over an hour. Though decked out in western-style suit he wore a necktie embellished with a lot of Chinese ancient poems. When seated Mundell began to talk about the "World Economic Development Declaration" (Zhuhai Declaration).

"The intention of the "Declaration" is wonderful. It features a sound content of creativeness and the writing is succinct and terse. Its significance lies in providing a platform for the developing countries to conduct dialogue and air their opinions. Of course, the "Zhuhai Declaration" needs to be continuously made up for improvement in practice," he said with a great sincerity.

When answering the appreciation of the Renminbi, a question of concern for many people, R. Mundell said that the US ever exerted a great pressure on Japan for the appreciation of the Japanese yen, effecting a great damage on the Japanese economy. Should the US try to force the Chinese currency to appreciate it will bring unfavorable impact on the development of the Chinese economy. However, the problem gradually took a turn-round after President Hu Jintao met the US President Bush at Bangkok. A certain person in charge of the Chinese financial organs pointed out in a clear-cut way: the Renminbi (People��s currency) should not appreciate. It is as said that a world financial conference is scheduled to be held in China next spring, at which the special topic for discussion will be on the exchange rate of the People��s currency.

Mundell stressed, if the People's currency is going to appreciate on a big scale the first and foremost possible impact is to put back the convertible time of the currency. And then it is possible to incur an economic depression in Chinese rural areas because the prices of agricultural produce will be relatively reduced. Aside from that, the growth rate of the Chinese economy as a whole will be downed to below 5 percent. Besides, the unemployment rate will rise on a big scale no matter whether in cities or in the countryside. The unhealthy bank loans will be aggravated with the currency policy turned to wavering. Lastly, due to some weakness of the people's currency in the international revenue and expenditure the appreciation of the currency cannot last long and will be possible to depreciate. As China's peripheral countries take Renminbi for currency in circulation it will be sure to lose its superiority should it is going to appreciate on a big scale.

He said, in the global economic depression during the recent years the Chinese economy proves to be the only healthy economic body. The Chinese import has been on a big increase while comparatively the imports of the seven western countries are on a big decrease. It is due to China's imports on a large scale that it has helped retard the economic depression of the world. In regard with this significance, the Chinese economy has given a wonderful performance in the global economy.

As to the question if the Chinese economy is overheated, R. Mundell held, ever since the beginning of the year the Chinese economy has confronted with the pressure demanding it to appreciate in which it surely has something to do with China's favorable balance of trade. To solve the problem the Chinese government has adopted some measures, for instance to exert more strength in overseas procurements and release the restrictions on the capital account and so on. He held that the policy for credit expansion practiced for the moment by the Chinese government will not only stimulate inflation but on the contrary make ease the deflation. Moreover, the credit expansion will eventually bring about the increase in importation and reduce the widening process in China's favorable balance of trade, thereby making China's economy return to a reasonable point of balance.

When answering reporter's question of how to revitalize the industrial base in Northeast China Mundell said, Japan and the ROK may play a relatively important role in it. Because geographically speaking Japan and the ROK are close by and have a better knowledge of the area. The Northeast China used to be an industrial base of great importance for China and it will again see a development at a surprising speed so long as the Chinese government will put into practice suitable measures.

Many Chinese are also concerned about the development tendency of the Euro-dollars. R. Mundell, known as "Euro father" gave an introduction as such: since the Euro-dollar came into the world in 1999 it has witnessed rises and falls. Starting from being strong it fell into weakness yet again became strong, the fluctuation within the two extremes reaching around 40 percent. For European economy this is surely an unstable factor. Nevertheless, the Euro-dollar, having seen years of vicissitudes has now become a strong currency next only to the US-dollar in the world today. In view of the present foreign exchange reserve in Europe the Euro-dollar will maintain a relatively strong tendency in the years to come.

Article by reporters of the People's Daily & translated by PD Online staff R. L. Han

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