WTO's Lamy: Yuan Flexibility 'Significant,' But Not Cure-All |
|
June 25, 2010
NEW YORK (Dow Jones)--China's decision to allow flexibility in the yuan's exchange rate is a "very significant development," but one that will have a greater impact globally on the political front than on the economic front, according to the head of the World Trade Organization.
NEW YORK (Dow Jones)--China's decision to allow flexibility in the yuan's exchange rate is a "very significant development," but one that will have a greater impact globally on the political front than on the economic front, according to the head of the World Trade Organization.
The WTO Director-General Pascal Lamy said in a Dow Jones interview Friday that China needs a stronger currency to better manage its domestic economy, which faces inflation and bubbles in certain areas. But this will come at a domestic cost, he added, as it is likely to cause some damage to the Chinese labor market, especially in labor-intensive industries such as textiles and footwear.
But globally, a more flexible yuan is only a "part" of addressing trade imbalances between the U.S. and China, Lamy said. The larger effect of yuan flexibility is political, Lamy said, as it takes some pressure off China, which had been increasingly criticized by the U.S. and the euro zone for keeping the yuan artificially depressed to make Chinese exports cheaper.
Related Links
