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Two internationally-acclaimed American economists said Sunday that they supported China's policy of maintaining a stable exchange rate for the renminbi.
The economists, speaking at a forum on Chinese economy organized by the Renmin University of China, also offered a dazzling array of scenarios for future change to the international monetary system, especially in China and other parts of Asia.
Ronald McKinnon, a Stanford professor, said the renminbi's current exchange rate reflected China's economic fundamentals.
The United States' trade deficit is not caused by the renminbi's exchange rate and the US decision to pressure China for a renminbi appreciation is "a misguided policy," McKinnon said.
"It (appreciation of the renminbi) will not solve any problem," he said.
Nobel prize laureate Robert Mundell said: "It would be a lose-lose proposition for China to appreciate the renminbi and it is not helpful for the rest of the world."
Both Mundell and McKinnon talked about the prospects of a single currency for Asian countries but the scenarios they suggested are far from those represented by the euro.
They said Asian economies' decisions to peg their currencies to the dollar were correct but they may need to form a currency alliance to ward off the impact of an unstable US dollar.
The US dollar is relatively stable at the moment, but major fluctuations of its exchange rate are possible, Mundell said. Such a situation did actually happen in the early 1970s.
Under such circumstances, Asian currencies should change their rates as well.
As the Asian economies grow increasingly integrated, unorchestrated change of their currencies' exchange rates would be disruptive to their economies, McKinnon said.
So they should seek to move in the same direction in an unstable environment, he said.
While there was much talk about a single currency in East Asia, Mundell said a currency that covered the whole APEC region was also a scenario that was worth consideration. The APEC economies refer to those on the rim of the Pacific Ocean that participate in regional cooperation.
(China Daily May 31, 2004)
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