Report says China’s Economic Growth Model
is not sustainable: Undervalued renminbi/yuan
“very little to do” with trade surplus
By Finfacts Team
Facing the world’s largest trade surplus, China’s exceptionally high growth is creating serious national and international economic imbalances and is unlikely to be sustained, concludes a report by the US Conference Board, released on Monday.
The Conference Board is a private US economic research organisation.
The Conference Board issued the report through its China Center for Business and Economics, based in Beijing. While China’s government clearly recognizes the risks associated with the country’s current growth trajectory and is undertaking measures to reduce the trade surplus and to spur consumption growth at home, it faces serious difficulties in reversing the trend of recent years.
China’s rapidly expanding trade surplus with the US has “very little to do” with an undervalued renminbi/yuan (In Mandarin, “renminbi” means the people’s currency; “yuan” means unit), and faster appreciation of the currency, though welcome, would be “no panacea”, according to the report.
“Faster currency appreciation, especially when combined with greater flexibility, would make it easier for the government to redress internal and external economic imbalances, but it is not a panacea and appropriate calibration is difficult,” the Conference Board report said.
“Although an undervalued currency contributes to China’s trade surplus, it is not a primary cause of it and has very little to do with the bilateral United States-China trade deficit,” it added.