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Well-ordered rise of yuan in best interest of all
By Lin Xu |
May 20, 2010, Thursday
|
Print Edition
Print Edition
CHINA should revaluate its currency for several reasons.
When we look at China's GDP growth in 2009, we can see exports did not contribute much to GDP growth.
Domestic consumption and investment have become more and more important and the government should focus more on proactive initiatives to continue this trend rather that trying to hit a "sweet spot" for the exchange rate that will serve as a "crutch" for growth.
In terms of export, even now most of the value of Chinese export comes from items where the exchange rate will have little influence (eg wool in garments).
In other words, increasing the exchange rate will have little or no influence on export levels in many cases.
A gradually rising yuan will provide resources and motivation for more Chinese firms to engage in global M&A activities and seek to build up global brands and market presence.
An orderly yuan appreciation will result in stable growth in imports of energy supplies and other raw materials, which will support long-term capital investments in countries such as Australia, Canada, Brazil and in many regions of Africa.
A well-managed appreciation of the yuan supports the interests of most in the world economy and in the longer term will provide the basis for continued growth and continued prosperity of China itself.
(Grace Lin Xu, a graduate of IMD's Executive EMBA class of 2008 and vice president of Royal DSM Ltd, China)
When we look at China's GDP growth in 2009, we can see exports did not contribute much to GDP growth.
Domestic consumption and investment have become more and more important and the government should focus more on proactive initiatives to continue this trend rather that trying to hit a "sweet spot" for the exchange rate that will serve as a "crutch" for growth.
In terms of export, even now most of the value of Chinese export comes from items where the exchange rate will have little influence (eg wool in garments).
In other words, increasing the exchange rate will have little or no influence on export levels in many cases.
A gradually rising yuan will provide resources and motivation for more Chinese firms to engage in global M&A activities and seek to build up global brands and market presence.
An orderly yuan appreciation will result in stable growth in imports of energy supplies and other raw materials, which will support long-term capital investments in countries such as Australia, Canada, Brazil and in many regions of Africa.
A well-managed appreciation of the yuan supports the interests of most in the world economy and in the longer term will provide the basis for continued growth and continued prosperity of China itself.
(Grace Lin Xu, a graduate of IMD's Executive EMBA class of 2008 and vice president of Royal DSM Ltd, China)
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