House prices and stock prices have soared. The inflation rate
has hit an 11-year record. Trade surplus has been running high. In
short, China's economy is on the edge of overheating. In order to
maintain sustainable economic growth, some drastic measures must be
taken.?
The crux of the current macroeconomic problems rests in the
liquidity surplus and the huge trade surplus caused by imbalance
generated by an externally orientated economy. Solutions to growing
aggregate demand, increased inflationary pressures and rising asset
prices all depend on easing and eliminating this crux. To solve the
problem our fundamental strategy would be to reduce intervention in
the foreign exchange market, thus allowing the market to decide a
valid RMB exchange rate via supply and demand.
China should promote a balanced economy through structural
adjustments. Transform the income distribution mechanism. Reform
the exchange rate system. In time a flexible floating exchange rate
mechanism will evolve.
For more details, please read the full story in Chinese. (
http://www.caijing.com.cn/newcn/home/todayspec/2007-09-16/30434.shtml)
(China.org.cn September 17, 2007)
