Washington: Asserting that the Chinese
currency is undervalued and has been used to promote a more
export-oriented economy, a top Obama administration official
has said that China needs to allow more flexibility in its
exchange rate.
Appearing before a Congressional Committee on Wednesday,
Federal Reserve Board Chairman Ben Bernanke agreed with US
lawmakers that China`s currency policies contribute to harmful
global imbalances and was one of the causes of the worldwide
recession.
"Yes, I broadly agree with that," Bernanke said when
asked a question in this regard by Senator Charles Schumer.
"I think most economists agree that their currency is
undervalued and has been used to promote a more
export-oriented economy," he said.
"I think it would be good for the Chinese to allow more
flexibility in their exchange rate. It would give them more
autonomy in their monetary policy so they could address
inflation and bubbles within their own economy," Bernanke
asserted.
"I think that it would be in their interests also to
combine a more flexible exchange rate with other efforts to
increase domestic demand, domestic consumption and achieve a
more balanced economy," he said.
Earlier, Senator Schumer said that China`s policy of
keeping its currency pegged to the US dollar helps to
perpetrate the imbalances in the global economy by subsidising
even more Chinese exports at the cost of increasing American
exports.
"It makes us too much of a consumption country and China
too much of an exporting country and not enough of a
consumption country. This has a direct impact on American jobs
now. Just about everyone I speak to admits that that`s the
case," he said.
"So if China appreciated its currency and moved to the
free-floating exchange rate, it would do more for jobs here in
the US than any single stimulus programme we could pass into
law," the Senator said.
In response to another question, Bernanke said he does
not know what share of imbalances can be attributed to the
exchange rate and how much to just the other policies that
lead to an imbalance of domestic versus foreign demand. "But
it clearly is a contributing factor," he argued.
"We hear of our manufacturers saying they cannot compete.
I`ve been to manufacturers in upstate New York that make great
products. They`re selling them in China. The Chinese are now
copying their products, not letting them sell in China
anymore... but then are going to sell them here," Schumer
said.
"This firm is worried it`s going to go out of business. I
hear this story over and over again. It`s a high-end product.
It`s a ceramic that deals with pollution in coal-producing
electricity plants," he said.
PTI
