Lin's comment on Yuan appreciation

On the eve of Mr Obama's visit to China, Lin Yifu, the first Chinese to be the World Bank's chief economist, fully elaborated on his position on the revaluation of the renminbi and resolutely opposed the push to let the renminbi appreciate to restore the balance of the world economy.　　In a speech to the University of Hong Kong in Monday, Lin said the appreciation of the renminbi could not help rebalance the global economy, but would hamper the global recovery, the Wall Street Journal reported. Earlier, the seven industrialized countries (G7) said excessive exchange rate volatility would have adverse consequences and urged China and Asian emerging markets to allow their currencies to appreciate.　　Including ECB President Jean-Claude Trichet (note: Mr Trichet's plan for the year to discuss exchange rates with Euro Group chairman Jongco) and the IMF and Japanese officials have called for China to let its currency rise against the dollar.　　At last week's meeting of the Group of 20 finance ministers, there were indications that emerging economies, including Brazil, Russia and Indonesia, might also begin to question China's currency policy. But Lin says short-term foreign exchange measures cannot solve problems in the global economy.　　He said that structural reforms were needed, including the need for the US to manage its own fiscal deficit, and to create conditions to reduce the savings rate and expand domestic demand. In an interview after his speech, Lin said other countries should not take the intervention to keep their currencies low to boost the export sector.　　He said the practice amounted to protectionism. Some people say this is exactly what China has been doing. In this regard, Lin believes that the situation in China is different.　　Even as currencies depreciate in other countries, China has kept its currency stable throughout the crisis. The appreciation of the renminbi could stifle the global recovery, Lin warned.　　The reason is that consumer goods imported from China will be more expensive, which will curb U.S. consumer demand. Lin stressed that for China, a stable renminbi is vital to keeping China's export economy running, and China's vibrant growth is important to the global recovery.　　If the United States and China do not recover, there will be no benefit to the global economy.　　Lin said the U.S. trade deficit with China accounts for One-third of the U.S. trade deficit, but it cannot blame the other two-thirds of the U.S. deficit on the renminbi. It is noteworthy that recently, the Chinese government uncharacteristically, no longer the international community to pressure the renminbi appreciation of the voice as in the past, the officials have made a speech to resist, pointing out that the global economic and trade problems are not in the renminbi, but in the U.S. dollar. Premier Wen Jiabao countered by saying he wants the dollar to remain basically stable. Finance Minister Xuren said developed countries should focus on the quality of their own economic decisions.　　Central bank governor Zhou Xiaochuan refers to the international pressure on the renminbi to appreciate. Observers pointed out that all this is clear to the international community that the issue of international trade imbalance is not blamed on the undervaluation of the renminbi, the real problem is the dollar instability and volatility, behind the U.S. financial policy mistakes, not to the Chinese contemporary sin Lamb. Allowing the renminbi to appreciate for the dollar is likely to trigger hot money inflows, prompting stock marketsProperty bubble and hit China's exports and economy.