China think tank calls for one-off 10% rise in yuan

Now is a good time to reform the yuan exchange-rate mechanism and allow a one-off 10% appreciation in the Chinese currency against the U.S. dollar, a prominent Chinese think tank said Wednesday, as it also warned the domestic economy is at risk of overheating this year.

A 10% appreciation of the yuan against the U.S. dollar would have limited impact on the Chinese economy, according to an essay by Zhang Bin, a research fellow in the Institute of World Economic and Politics under the Chinese Academy of Social Sciences.

China should allow the yuan to rise or fall as much as 3% annually against a basket of currencies, he said.

In another essay presented by the institute during a conference Wednesday, researchers called on China to adopt a tighter monetary policy. They said that if Beijing’s fiscal and monetary stimulus policies remain unchanged from last year, the domestic economy will grow 16% in 2010 and risk overheating.

Source: The Wall Street Journal, Victoria Ruan, January 5, 2010

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