China will look at revaluing its currency when global partners begin to withdraw their stimulus packages, a top Chinese central banker said on Saturday.
However, Zhu Min (朱民), deputy governor of China’s central bank said revaluation would not fix world trade imbalances.
He told the World Economic Forum in Davos that China is trying to raise domestic consumption, but warned it would take time to get thrifty Chinese to spend more.
Zhu said Beijing is committed to the G20 Pittsburgh summit agreement that countries will coordinate exit strategies from their massive stimulus packages adopted to combat the global downturn.
“If global [partners are] ready to do exit strategy, China is ready ... including various issues — liquidity issue, exchange issue,” he told the forum.
China has been under fire for keeping the yuan weak against the dollar. Critics say this keeps Chinese exports artificially cheap and has fueled a massive trade surplus with the West. China’s trade surplus reached US$196.1 billion last year.
Zhu said a stronger yuan would not solve trade imbalances.
“Exchange rate is an issue within this rebalancing issue. Exchange rate will not be able to change the whole thing,” he said.
Zhu said Beijing recognizes the need to wean itself from dependence on exports.
“The crisis tells us that a purely export model is not sustainable and we’re working on it,” he said. “Things have improved, but it takes time.”
“I’m still an old fashioned person. If the glass is OK, I’m not going to throw it away to buy a crystal one even if my income increases. I’ll still use it,” he said.
IMF managing director Dominique Strauss-Kahn also noted that it is “very difficult to shift this growth model” from export-led to a more domestic-led one.
With US consumers buying less amid the crisis and China spending on a stimulus and trying to get Chinese to buy more, the problem of trade imbalances is “looking a little better than before crisis,” Strauss-Kahn said.
But he warned that Chinese consumers are far from able to offset lower US consumption.
In a separate session, Standard Chartered bank’s group chief executive Peter Sands said there was no quick fix to China’s currency dilemma.
“I think there [are] a lot of simplistic things said about the renminbi. Some seem to believe that if it were revalued, all the macroeconomic imbalances will disappear instantly. That’s just wrong. It’s far too simplistic,” he said.
He pointed out that the value of Asian economies has increased, and that “value is going to be reflected in the way Asian currencies are valued relative to the Western” currencies.
“I believe that over time, the renminbi and other Asian currencies will get more valuable and managing that in an orderly way is important to reconciling some of the macro-economic imbalances in the world,” he said.
French President Nicolas Sarkozy and billionaire financier George Soros made prominent calls during the Davos meeting for China to allow its currency to appreciate.
In a keynote speech on the first day of the forum, Sarkozy made a veiled attack against China, saying festering trade imbalances were harming economic recovery.
“Exchange rate instability and the under-valuation of certain currencies militate against fair trade and honest competition,” he said.
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