A US economic expert has said that forcing China to revalue its currency, the renminbi (RMB), might temporarily benefit some manufacturers, but would not address the long-term needs of the US economy.

Most important of all, "forcing a revaluation of the RMB is unjustified by the prevailing rules of the international economic order," said Albert Keidel, Senior Associate of Carnegie Endowment for International Peace, a think-tank based in Washington.

In an article entitled "China's Currency: Not the Problem," Keidel said that the move would "set a dangerous and destabilizing precedent."

The article was recently published in Carnegie's "Policy Brief" and was carried on its website.

Keidel said that in Washington, members of Congress, business representatives, and pundits of many stripes are falling over each other to demand that China revalue its currency and they blame the loss of US manufacturing jobs and the ballooning trade deficit on all alleged undervalued RMB.

The US Congress is threatening to impose a 27.5 percent tariff on Chinese products unless China revalues its currency.

But Keidel said that international experts and specialized agents, including the US Treasury Department and the International Monetary Fund (IMF), agree that China's exchange rate does not provide it with an unfair advantage.

"Although China does have a trade surplus with the United States, it has a deficit with the rest of the world," Keidel said, who was Deputy Director of the Office of East Asian Nations of the US Treasury Department through August 2004.

He said that a surplus with one trading partner does not prove that a country's exchange rate is unfair. "No one thinks other countries should buy the same amounts from America that America buys from them," he added.

"A large trade deficit with one trading partner does not by itself prove that the partner has a bad exchange rate," he pointed out.

He also said that China's global trade surplus is not excessively or unfairly large.

Compared with many other countries, he said, China's 2003 and 2004 world trade surpluses were not large as a share of GDP -- both roughly three percent. "These surpluses are smaller than those for Germany, The Netherlands, Thailand, Argentina, Malaysia and Singapore," he said.

Keidel also noted that China's global surpluses in 2003 and 2004 were respectively seven and eight percent of the US deficit. The figures are similar to Singapore's share and much less than those for Japan, Germany, the oil exporters and the entire euro currency area, he added.

Nevertheless, the surpluses from Japan, the oil exporters and the euro area together account for more than 60 percent of the US trade deficit, he said.

On the question of how China has such a large country-to- country surplus with the United States while not having a large global surplus, he said that the reason is that some Chinese " exports" to the United States are really re-exports of large volumes of materials, parts and kits imported from elsewhere, such as South Korea, Taiwan, the Philippines, Indonesia, and even India and Europe.

"China is frequently the last stop in a long international supply chain," he added.

Exports from the rest of East and Southeast Asia directly to the United States declined between 2000 and 2004, while re-exports through China increased, the expert said.

Keidel said as shown most recently by the US Treasury's May 17 report to Congress, experts at both the Treasury and the IMF have long recognized that China's exchange rate is not unfair for trade.

But maintaining this conclusion is politically difficult, he pointed out, because of media attention on loss of US manufacturing employment and outsourcing.

Source: Xinhua