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Top minds in heated debate on RMB, trade
By Fu Jing (China Daily)
Updated: 2006-06-23 08:49
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A heated debate broke out yesterday over the effect of the renminbi's value on the Sino-US trade imbalance.
Renowned Chinese economist Justin Yifu Lin and leading US trade expert Nicholas Lardy argued over whether the currency's value should be increased to help reduce China's exports to the US.
Lardy, a senior fellow of the Washington-based Institute for International Economics, said "the US dollar has been overvalued and China's currency has been undervalued for a long time."
Addressing a seminar in Beijing, he said he didn't think the renminbi's value was the most important factor influencing trade between the two nations, however he still urged China to appreciate the currency.
He also claimed the US export licence system which China has bitterly complained about is not a major factor in the imbalance.
But his claims were rejected by economics professor Lin.
Lin, who is based at Peking University's China Centre for Economic Research, said an appreciation of the renminbi would not necessarily benefit the US economy.
Many of the goods exported by China, he pointed out, are no longer produced in the US, and if the US turns to other countries for them it will risk paying higher prices.
Lin said the current deficit was caused by the different configurations of industries in China and the US, with the former producing low-tech products and the latter high-tech products and services.
Appreciating the renminbi may not dampen Chinese exports, warned Lin.
Some Chinese supplies are not easily replaced by supplies from elsewhere, he argued, and if the demand remains the American deficit could even expand.