.contact us |.about us
HomeBizChinaMetrolifeDragon KidsForum
News > National News...
Search:
    Advertisement
Comment: No time to raise renminbi's value
( 2003-07-01 12:31) (China Daily)

In an era when everybody is scrambling for a bigger market share in the global economy, to criticize a country for its foreign exchange policy and try to pressure it into raising the value of its currency, seems, to some, to be an excuse for failing to identify what is wrong in their own backyard.


[chinadaily.com.cn]
China, with a staggering export growth and soaring foreign exchange reserves, has recently become the target of such an accusation.

As the Chinese renminbi fluctuates very narrowly around the US dollar at 8.28:1 and has gone down with the falling dollar, there is a growing chorus that the peg is unfairly helping the country gain shares in global markets and the value of the renminbi should be raised or immediately floated to let market forces decide its value.

But is the peg really unfair? No. Should the value of the renminbi be artificially raised? No. Should it be floated? Yes, but not at the moment and the timetable should be decided by China alone.

Critics of China's financial and trade policy often cite the country's export growth and trade surplus as evidence in support of this contention.

The approach is not a sound one because these figures can not reflect what the critics believe is happening.

China's powerful processing trade sector has an important role, if not a central one, in explaining why what China really earned in foreign trade is not as high as the exports and surplus figures suggest.

China earns a thin profit from processing trade, with a big part of the profits generated being taken by overseas companies that put brand marks on the final products. But all these products are being tallied as originating in China.

For countries that complain about trade deficits with China, it is very likely that their own companies, which earn handsome profits in China, are responsible for a share in the trade deficit.

The system of statistics of some of China's trading partners, due to technical reasons, includes their imports from Hong Kong as coming from the mainland, but excludes Hong Kong when counting their exports to China. This also distorts the real picture.

The US manufacturing sector often complains about the country's trade imbalance with China. In fact, China and the United States in the mid-1990s co-sponsored a team to research the trade deficit issue. The conclusion was that the deficit was greatly exaggerated due to technical reasons. But many people from the US side seem to have forgotten this conclusion or appeared to have never heard of it.

Critics should also bear in mind that while China's exports increase, China's imports also jumped dramatically, and the trade surplus shrank.

During the first five months of the year, both exports and imports were around US$150 billion, with a surplus of US$2.4 billion, or less than 1 per cent of the total foreign trade volume.

Calculations are subject to debate not just in trade statistics. It is an even more complicated issue to calculate a reasonable exchange rate because in economics, there is no universally agreed upon method for doing this.

Some US manufacturers argue the renminbi's exchange rate to the dollar is undervalued by some 40 per cent, but never explain how they arrived at this figure.

Their most frequently used evidence is China's great volume of exchange reserves.

But a close study on how these reserves were accumulated will indicate that it is not a sound basis for advocating a renminbi appreciation.

In fact, the reserves were accumulated under a distorted supply-demand system, a legacy of a rigid foreign exchange control system.

Hard currency earned by exporters still has to be sold to banks, while the demand for foreign currency is very much suppressed in a tradition that highlights the fear of wasting precious financial resources.

The need to safeguard foreign exchange reserves was reinforced during, and in the wake of, the 1997-99 Asian financial crisis, when the reserves acted like a dyke keeping the floods of financial danger away from China.

If all the domestic needs of foreign currencies were met, the reserves would be much lower today.

Many economists agree that the most effective standard for the "correct" exchange rate of a currency is whether the country feels comfortable with it, which means whether it promotes sound economic growth, a reasonable international balance of payments and a favourable employment level.

China feels comfortable with its current exchange rate and it should be so maintained in the near future. And China has the right to decide its exchange rate policy and no international agreement forbids that.

Nevertheless, China, in pursuit of a more mature market economy, has said its goal is to have a more flexible exchange administration system and eventually to float the renminbi to let market forces decide its value.

But it should be a gradual process. Things could be done in the process that include allowing exporters to retain an increasing part of foreign currency earnings, relaxing the control on foreign exchange demand and letting the renminbi float in a bigger range than its current level.

But neither Chinese banks nor enterprises have yet developed the necessary capability to deal with a more flexible exchange rate system.

So the timing, at the moment, is certainly not right for making major changes.

And it is even more unreasonable to artificially raise the renminbi's exchange rate before market forces have more influence over its value.

A healthy Chinese economy is a boon for the world because it generates great demand.

A premature change of the exchange rate at the moment is very likely to bring financial shocks and harm the economy.

Is a troubled Chinese economy a desirable thing? Just ask Boeing, Honda or Nokia.

   
Close  
   
  Today's Top News   Top National News
   
+Comment: No time to raise renminbi's value
( 2003-07-01)
+Six students drowned after boat sinks in South China
( 2003-07-01)
+A hard-won victory by nation and its people
( 2003-07-01)
+Wen lauds HK's victory over SARS
( 2003-07-01)
+New regulation to remove monopolies
( 2003-07-01)
+Premier Wen ends HK visit
( 2003-07-01)
+Weddings a logistical nightmare for China's transients
( 2003-07-01)
+North China city to build large-scale ski hill
( 2003-07-01)
+FM: Promotion of China-EU ties good for both sides, world
( 2003-07-01)
+UNDP helps unemployed workers in central China
( 2003-07-01)
   
  Go to Another Section  
     
 
 
     
  Article Tools  
     
  E-Mail This Article
Print Friendly Format
 
     
  Related Articles  
     
 

+Central bank to maintain renminbi interest rate
2003-06-24

 
     
   
        .contact us |.about us
  Copyright By chinadaily.com.cn. All rights reserved  
主站蜘蛛池模板: 人妻精品久久久久中文字幕69| 国产特黄一级片| 中文乱码人妻系列一区二区| 曰批免费视频播放在线看片二| 亚洲欧洲日产韩国在线| 男女性爽大片视频男女生活| 国产123在线观看| 韩国v欧美v亚洲v日本v| 国产欧美久久一区二区三区| 2021成人国产精品| 国产青青草视频| 99精品一区二区三区| 妞干网免费视频| 丁香六月在线观看| 成年女人午夜毛片免费视频| 久久久精品波多野结衣AV| 日韩高清免费在线观看| 亚洲国产欧美久久香综合| 欧美色视频在线观看| 亚洲精品视频在线观看免费| 男人操心女人的视频| 内射一区二区精品视频在线观看| 美女的尿口免费| 四虎成人精品在永久免费| 都市春色校园另类| 国产在热线精品视频国产一二| 精品香蕉在线观看免费| 国产真实迷j在线播放| 你懂的手机在线视频| 国产精品成人久久久久久久| 55夜色66夜色国产精品视频| 国产麻豆交换夫妇| 99久久无色码中文字幕| 在线观看噜噜噜私人影院| a级毛片免费观看视频| 好吊日免费视频| rewrewrwww63625a| 天天摸天天舔天天操| a毛片免费全部播放完整成| 女人l8毛片a一级毛片| chinese麻豆自制国产|