China should keep its renminbi (RMB) currency pegged to the US dollar in the short term and a floated currency will do more harm than good to the country, said Steve Forbes, president and CEO of Forbes Inc. in Beijing Monday.

According to Forbes, who is attending the 37th International General Meeting of the Pacific Basin Economic Council (PBEC) held from June 25 to 29 in Beijing, the US Federal Reserve made a mistake in creating too many dollars and caused small inflation, which, because the RMB is pegged to the US dollar, has become one reason that China's economy is a little overheated.

But the Federal Reserve is changing the mistake and China's economy is to benefit. China's yuan, or RMB, should remain stable instead of being revalued despite outside pressure, he said.

What China should do is to continue its banking reform to reduce non-performing loans (NPLs) and enhance transparency before reaching the goal of full convertibility of its capital account in the long run, he said.

"One hour is 60 minutes. There is no rush to shorten it to 45 minutes," the magazine tycoon said.

The United States should not use trade deficits with China to require China to change its exchange system. "The United States has had trade deficits for the past 300 years, which has not affected its economy," Forbes said.

The media celebrity also said that China's small and medium-sized enterprises (SMEs) should be able to benefit from the country's continued reform and not rely mainly on bank loans which are limited for financial support.

"China should further develop its equity market, make reform to allow venture capital to grow and most importantly, create a mortgage market, the biggest financial source for SMEs in the United States, and various sources of funds to boost its economy."

(Xinhua News Agency June 29, 2004)