Nobel Laureate: China should stabilize RMB to study effect of previous appreciation
Source: Xinhua Date: 2007-09-21
China should stabilize the exchange rate of RMB against the U.S. dollar to study the effect of its accumulated appreciation of close to 10 percent over the past two years, 1999 Nobel Laureate in economic sciences Robert Mundell said here on Wednesday.
Speaking at a lecture at the Chinese University of Hong Kong, Mundell said "it is time to pause the appreciation of RMB and let it stay at a stable level."
China abandoned its policy of pegging the RMB to the U.S. dollar in 2005 and the currency's exchange rate against the dollar has rose close to ten percent since then.
Refuting an argument that says the RMB is undervalued, thereby leading to the U.S. trade deficit, the father of the euro cited figures to note that China's trade surplus against the United States only contributed a small portion of the U.S. deficit.
Number mega trends in the world economy, including the unprecedented global expansion, globalization, the IT revolution, the success of the euro, the rise of China, among others, have led to "global imbalances, reflected in a huge current account deficit of the United States," Mundell said.
The dollar deficit is "endemic in the dollar system" and cannot be explained by the fixed rate of the RMB or the Japanese yen, Mundell said, adding that the dollar deficit has persisted since the end of the dollar shortage in the 1950s.
The 2005 Nobel Laureate in economic sciences Thomas Schelling, along side Mundell at the Chinese University of Hong Kong, lectured on nuclear nonproliferation, and Edmund Phelps, winner ofthe 2006 Nobel Prize in economic sciences, lectured on the importance of finance professionals in the development of modern economies.
