Push for stronger yuan does no good now: US expert
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Nobel economics laureate Paul Krugman's recent push for a stronger Chinese currency "was wrong," and such a move currently does no good to the U.S. and Chinese economies, a U.S. expert said recently in an article on Forbes' website.
Shaun Rein, founder and managing director of the China Market Research Group, a strategic market intelligence firm, said that revaluing the Chinese yuan right now would "jeopardize the world's fledgling economic recovery."
Krugman, who is also The New York Times columnist, wrote recently in an article headlined "World Out of Balance" that China severely undervalued renminbi, and he called on the U.S. government to push for a stronger Chinese currency.
Citing Krugman's view that China needed to strengthen the yuan to reduce America's trade deficit and spur worldwide recovery, Rein argued that "it is better for American businesses for China to maintain current yuan rates until the worldwide recovery is on a firmer footing."
He stated that if the renminbi were to appreciate, billions of dollars of purchasing power would be taken from American consumers, which he said satirically would not make the upcoming holiday season "such merry time."
With the U.S. unemployment rate standing at 10.2 percent, the worst in more than 26 years, American consumers are already stretching their shopping dollars farther than they have in a long time, he wrote.
Regarding the impact of a stronger yuan on China, which is not immune from the ongoing global financial crisis, Rein said that even a small currency appreciation would cause thousands more factories to shut down and leave millions more unemployed.
"That wouldn't be good for China or anybody else," he said, warning that the possible crisis in the Chinese economy would affect American exports to China.
"Even if China's currency were to appreciate, production would just move to cheaper countries like Vietnam, not back to America," he added.
"Unless there are structural reforms to America's economy, a stronger renminbi will not lower the trade surplus in any meaningful way," he stressed.
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