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No Hurry for Change of Yuan Rate, says WB

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BEIJING, China (April 6) – China should not revamp its exchange rate regime before the conditions are ripe, a senior World Bank economist said yesterday. If Chinese policymakers want to refocus the renminbi’s exchange rate system, they should strive to build a more flexible one instead of simply revaluing the currency, said Hans Timmer, a […]

BEIJING, China (April 6) – China should not revamp its exchange rate regime before the conditions are ripe, a senior World Bank economist said yesterday.

If Chinese policymakers want to refocus the renminbi’s exchange rate system, they should strive to build a more flexible one instead of simply revaluing the currency, said Hans Timmer, a senior economist at the bank.

Hans Timmer, a senior economist at the World Bank (WB), said at a Beijing congres: “There is no hurry there,” adding that when conditions are ripe, “you have the opportunity to do that.”

China is under pressure from some major trading partners to revalue its currency, which they claim is undervalued and has been giving Chinese exports an unfair advantage. The Chinese Government has insisted it will not resort to any simplistic revaluation of the currency but pledged instead to gradually improve the exchange rate forming mechanism.

While the renminbi faces upward pressure, it is not because it is undervalued, but mainly because of hefty capital inflows, Timmer said. “We don’t see any obvious signs, from the trade perspective, that the currency is either significantly overvalued, or undervalued.”

According to the WB report, China accounted for 88% of foreign direct investment in the East Asia and Pacific region last year, which stood at US$63.6 /€49 billion, up from a low of US$49.9/€ 38.6 billion in 1999.

Soft landing attainable

While China’s strong 9.5 % economic growth and soaring investment and loan growth last year has prompted worries on overheating of its economy, the nation is well on track for a soft landing in the next two years, Asian Development Bank economists said yesterday.

Zhuang Jian, the bank’s senior economist, said China’s vast fixed asset investment, stable retail sales market and high export growth witnessed in the first two months of this year suggested its gross domestic product could grow at a higher rate.

“China’s economy is likely to grow 8.5 % in 2005, 8.7 % in 2006 and 8.9 % in 2007,” he told a press conference in Beijing yesterday.

This means the country’s economy will achieve its targeted soft landing this year and in the next two years, he said. (Source China Daily)

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