Yu Yongding: The Appreciation Of RMB Is Not Enough To Curb Inflation.

Before the meeting of the finance ministers and central bank governors of the group of twenty (Group 20, G20), Yu Yongding, a senior economist at the Chinese Academy of Social Sciences and a former adviser to the Central Bank of China, said in an interview.

Yu Yongding said that from the Chinese point of view, the appreciation of the renminbi is quite beneficial.

China's trade surplus is about US $200 billion, and its capital account surplus is around us $100 billion.

But if China can only use these funds to buy US government bonds with low returns and high risk of future capital loss, the significance of holding these funds will not be reflected.

The Chinese government announced a trade surplus of US $183 billion in 2010.

Yu Yongding's comments were closely watched, partly because he was a member of the monetary policy committee of the Central Bank of China from 2004 to 2007, and has maintained a high profile since then.

Since China decided to increase its flexibility in mid June last year, the yuan has maintained an annual appreciation of about 6% against the US dollar.

But if we take into account the different inflation levels between the two countries, the renminbi will appreciate at an annual rate of about 10%.

The G20 conference will be held in Paris on Friday, when China's exchange rate policy will become the focus of discussion among G20 finance ministers and central bank governors.

Yu Yongding did not specify his level of RMB exchange rate.

But he said China should reduce its intervention in the foreign exchange market.

Yu Yongding said that the appreciation of the renminbi would help curb inflation, because imports after the appreciation of the dollar would become cheaper.

He said that China's choice now is not whether the renminbi will appreciate in the future, but whether the appreciation of the renminbi comes from the change of nominal exchange rate or inflation.

This is also the view of Tim Geithner, the US Treasury Secretary, for a long time.

However, so far, the Chinese government has not been able to accept this view because of worries about the impact of RMB appreciation on the industry.

Yu Yongding said that China's export industry may suffer losses, but it can help unemployed employees and bankrupt enterprises.

Although this is cost effective, it can afford it.

He pointed out that if China reduces foreign exchange intervention and reduces US government bonds, the long-term interest rate of the United States may rise, and the economic problems of the United States will become more serious.

Yu Yongding said that the officials of the US and China should coordinate their policies and make corresponding adjustments after communication so as to alleviate the adverse effects that the two countries may face.