“I don’t think the yuan is undervalued,” Wen said at a press conference in Beijing marking the end of China’s annual parliamentary meetings. “A stable renminbi exchange rate in the midst of the global financial crisis has played an important role in the global economic recovery.”
U.S. President Barack Obama is pressing for a stronger Chinese currency as part of efforts to rebalance the global economy. Central bank Governor Zhou Xiaochuan said March 6 that while crisis policies, including the yuan’s peg to the dollar, will end “sooner or later,” China must be cautious on the timing.
“We oppose countries’ pointing fingers at each other and even forcing a country to appreciate its currency, because that won’t help renminbi exchange-rate reform,” Wen said, using another word for the yuan.
Nobel Prize-winning economist Paul Krugman said global economic growth would be about 1.5 percentage points higher if China stopped restraining the value of its currency and running trade surpluses.
Twelve-month non-deliverable yuan forwards climbed 0.3 percent to 6.6290 per dollar last week, according to data compiled by Bloomberg. The gain was the most in two months.
The yuan’s spot rate rose 21 percent between July 2005 and July 2008, when the government halted its advance to protect exports. The central bank may allow the currency to strengthen 3.4 percent to 6.6 yuan per dollar by the end of this year, according to the median estimate in a Bloomberg News survey of 25 analysts.
Krugman said China’s currency policy has a “depressing effect” on economic growth in the U.S., Europe and Japan, as measured by gross domestic product. If China’s currency, the yuan, were not undervalued, it would have a “significant” impact on the global recovery, he said in a March 12 speech in Washington.
“If we could get some change in China’s currency policy, it would help the world,” Krugman said.