A sharp appreciation of China's currency will adversely effect the country's rural areas, said Nobel Laureate Joseph E. Stiglitz at the ongoing China Development Forum being held in Beijing.

To deal with its rocketing trade surplus, China should levy a tax on exports rather than allowing the value of the yuan to rise, said Stiglitz, a professor from Columbia University in New York.

The export tax would increase central government revenues which could be used to invest in rural areas, he added.

If the yuan is allowed to appreciate it would cause international prices of agricultural products to decline, he said.

"When you revalue the yuan, you pay less for imports and that means the international price of rice and the international price of wheat goes down and that means food prices inside the country will go down."

Stiglitz says this price slashing would make it difficult for the market alone to provide farmers with stable incomes.

"China should protect itself by making sure the exchange rate does not appreciate rather than having to subsidize its farmers," said the professor.

Joseph Stiglitz was awarded the Nobel Prize in 2001 in economics for his analyses of markets. He worked with the Council of Economic Advisers from 1993-97, during the Clinton administration.

Source: Xinhua