By Xin Zhiming (China Daily)
Updated: 2007-11-07 09:27

Japan's policy to freely float the yen has done "terrible" damage to the country's economy. "That's something to be worried about and avoided."

Although it has not happened in China, Mundell said, "it's a good lesson to keep in mind that you (China) don't let it go up too rapidly in the future."

Economists have forecast that the yuan would appreciate by about 5 percent this year. It was 7.46 against the US dollar yesterday, according to the central bank's central parity rate, appreciating by about 4.5 percent so far this year.

The International Monetary Fund has decided to adopt a new framework for the organization's bilateral surveillance, or the way in which it monitors and assesses its member countries' economies.

It is updating a 1977 decision on surveillance of exchange rate policies and has added a new rule that members should avoid exchange rate policies that result in external instability.

The ruling has been widely interpreted as a move to increase pressure on China to allow the yuan to be revalued faster. The World Bank and the IMF last month also called on China to reform its exchange rate regime.

But Mundell said their decision might not be right. "There are 3,000 economists with PhDs in the IMF, but it doesn't mean they have the right ideas."

The economics professor also suggested that China should take advantage of IT tools like distance learning to push education so that more people benefit from knowledge.

The 17th Party Congress, which was convened last month, made the right move in taking a fresh look at non-economic issues such as the environment and social harmony, he said, adding education would help narrow regional inequality.

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