Robert Mundell: don’t push China to revaluate currency!

Nobel economist Robert Mundell gave a lecture on the Chinese economy, in Simon Fraser University, BC.

Below quoted from the Calgary Sun:

"I don't think China will accept it," said Mundell. "It's moreover not a good policy for the United States or the IMF to push because it would do countless damage to the poorer parts of the Chinese economy."

While China is the most successful of the world's emerging economies, it still has 80 million people living on less than $1,000 US a year.

Boosting the yuan by the 40 to 50 per cent that some have demanded would make their products instantly uncompetitive, Mundell warned.

"Appreciation would be devastating to those people," he said.

Mundell noted the Japanese economy ground to a halt for most of the 1990s and its banking system collapsed after Japan agreed to boost the yen.

Removing exchange controls by allowing China's currency to float would be equally damaging as Chinese demand for dollars exploded and the yuan tanked, Mundell argued.