Rapid yuan appreciation 'to benefit no one'
Updated: 2012-11-03 07:54
By Fu Jing in Brussels (China Daily)
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China should not heed calls from some US and European politicians for a rapid appreciation of the renminbi, as this would harm both the Chinese and global economies, said leading European experts.
The experts made the comments after the renminbi-dollar exchange rate has risen for several days and electioneering US politicians continue to claim China is "manipulating" its currency .
"My opinion is not the same as what some people in America say, so do some Europeans, that they want to see the renminbi appreciate rapidly," said Giles Merritt, secretary-general of the Brussels-based think tank Friends of Europe.
Merritt said rapid appreciation would harm China's export industries in its coastal regions, and a further slowdown in the Chinese economy would drag down global growth.
He said that the best option for China would be "slow and gradual" currency liberalization.
The renminbi's exchange rate against the US dollar has touched the permitted 1 percent upper limit of the officially set reference rate for five out of the past six days, and stood at 6.2387 yuan per dollar on Thursday.
A report released earlier this week by the Society for Worldwide Interbank Financial Telecommunication said global use of the currency has surged.
In August the renminbi rose to 14th in the table of payment currencies, up from 35th in October 2010, while most other currencies remained flat or moved marginally during that period, according to the report.
Duncan Freeman, research fellow of the Brussels Institute of Contemporary China Studies, said recent renminbi appreciation is a challenge for China's exporters.
"But what is more important than the nominal rate is the real exchange rate which has been rising in recent years as a result of increasing costs in China, especially labor," said Freeman.
He said renminbi appreciation would intensify the problems of Chinese exporters who face both international and domestic economic pressures. Their major markets in the US and Europe are in crisis, while they also face rising costs at home.
Freeman said exchange rate reform in China will be one factor in rebalancing the global economy, but not the main one.
"What is more important will be the internal rebalancing in China, the European Union and the United States," said Freeman. "There are signs showing that in the short term, the Chinese economy has been stabilized, but reform will be necessary to ensure long-term stable growth."
Sylvain Plasschaert, advisory board member of the European Institute for Asian Studies, said China should seek small and gradual currency appreciation.
Andrew Small, Asia Program transatlantic fellow of the German Marshall Fund of the United States, said for many years, the value of the renminbi has been affected by a combination of economic and political factors.
With the Chinese economy now showing signs of picking up, after weak indicators in recent months, Small said an inflow of capital is to be expected, which is magnified by the fact that China is also virtually the only major economy in the world growing at a healthy rate.
"In such a situation, an increase in the valuation of the renminbi is both natural and welcome for the global economy," said Small.
Liu Jia contributed to this story.