Chinese experts appreciate a more mature RMB exchange rate mechanism

Around the world a lot of talk is swirling these days about Chinese Renminbi yuan appreciation. Countries like the United States and Japan are urging for the adjustment of the yuan exchange rate to push its value higher. A leading Chinese economic expert says he appreciates a more mature currency exchange rate in the country.

Economic experts have different views on the exchange rate of Chinese currency. Some think it will remain stable, some believe the exchange rate should be revalued. Others still, suggest that the yuan exchange rate mechanism should be improved and the "managed floating rate" should be recovered.

Professor Wu Jinglian, a senior economist with the Development Research Center of the State Council, says he prefers the third opinion. He notes there are four advantages of the "managed floating rate."

"First, it helps to defend against a distorted foreign exchange rate, which increases the resource allocation efficiency. Second, it will encourage enterprises to facilitate technological innovation and improve added value to their exported products, so the export price will increase."

Professor Wu adds such a mechanism will alleviate the cost distortion of export-oriented enterprises, as well as social cost. In addition, it will strengthen the effect of monetary policies. Professor Wu Jinglian says Chinese government has already made a commitment to a more mature exchange rate mechanism, which the United States and other countries welcome. An expert team dispatched by the US Finance Ministry has begun their cooperation with Chinese counterparts, aiming to provide technological assistance. For that reason, Professor Wu predicts the yuan exchange rate will be slightly adjusted in the future.

"As China's trade deficit with the US grows, revaluation pressure on yuan will lessen, and the exchange rate mechanism will improve, so the problem of exchange rate should lessen correspondingly."

Early this month, Chinese Finance Minister Jin Renqing said China is considering to make its exchange rate "more flexible" to maintain its stable currency policy.

Source: CRIENGLISH.com