GENEVA — China should resist international pressure to revalue its currency, the United Nations' top economist said last week.
"I don't think the Chinese should be pressured to revalue," Ian Kinniburgh, U.N. director of economic and social affairs, said in a telephone interview. "They should wait until they feel safe to put their feet in the water. They still need to improve their financial system."
Surging imports of low-cost Chinese manufactured goods and the sharp increase in China's trade surplus with the U.S. have intensified calls by domestic manufacturers, members of Congress and some in the Bush administration for Beijing to revalue its currency, the yuan.
China has maintained an exchange rate of 8.28 yuan to $1 since 1995. Opponents of Chinese trade policy say the yuan is artificially undervalued, lowering prices of exports by as much as 40 percent and putting U.S. companies at a competitive disadvantage.
Kinniburgh said an alternative to revaluation is for China to tax its exports. A tax would have "the same trade effect as a revaluation" but fewer consequences for China's financial system, he said.
Federal Reserve Board chairman Alan Greenspan last week testified before the Senate Finance Committee that imposing tariffs on Chinese imports would have a negative impact on the U.S. economy and pressuring China for a more flexible exchange rate would not boost manufacturing and jobs.
In a report, "World Economic Situation and Prospects as of Mid-2005," issued Wednesday, the U.N. estimated the U.S.'s current account deficit will grow to more than $700 billion this year, compared with $650 billion in 2004.
U.N. economists estimated that China's economy will expand by 9 percent this year, driven by exports and high levels of investment, and anticipate a slowdown in the growth of the U.S. economy to 3 percent from 4.4 percent in 2004.
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