Monday, November 29, 1999

World Bank`s Lin: China revaluation would hurt U.S.

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The chief economist for the World Bank said on Saturday that if China were to revalue its currency it would actually hurt rather than help the U.S. economy.Speaking to students on China's role in the future global economy, Justin Yifu Lin said critics who claim a purposely undervalued Chinese currency is a hampering U.S. growth are wrong.He acknowledged that if China stopped selling renminbi and buying foreign currencies, the policy that critics say keeps the currency artificially undervalued, Chinese exports would become more expensive.But he said because most of the products China exports to the United States are labor-intensive goods U.S. manufacturers stopped making years ago, the U.S. would only have two choices: buy the products from other countries or from the Chinese.Either way, Lin said, the cost of those goods would rise for U.S. consumers and that would depress both consumer spending and job creation in the United States.He argued that goods made in other parts of the developing world were more expensive than Chinese made goods because, if they were not, the United States would already be buying them.Many economists -- including some from the World Bank's sister organization the International Monetary Fund -- think revaluing the currency is just one of several steps China needs to take in order to shrink its massive reserves.China would also need to adopt policies to encourage domestic consumption, such as improving health care and other social safety net services so that households would save less and spend more.Economists have warned for years that China's large reserves, currently more than $2 trillion, and large deficits in countries such as the United States posed a threat to global economic stability.Lin joined the World Bank, which provides financial and technical assistance to developing countries, in 2008 from the China Center for Economic Research at Peking University.A Chinese national, he is the first non-Westerner to serve as the organization's top economist.(Editing by Doina Chiacu)
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