China Economy

Yuan at fairer rate than 5 years ago, says Summers

PUBLISHED : Tuesday, 15 January, 2013, 12:00am
UPDATED : Tuesday, 15 January, 2013, 5:26am


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Lawrence Summers, the former top economic adviser to US President Barack Obama, has said that the yuan is not as undervalued as it was five years ago.

"The renminbi is not saliently, strikingly undervalued in the way it was five years ago," Summers said yesterday at the Asian Financial Forum in Hong Kong.

The comments are in line with tempered criticism from abroad of China's control over its currency, even as the US Treasury Department reiterated in November that the yuan "remains significantly undervalued".

The yuan has appreciated about 17 per cent against the US dollar since the end of 2007.

China "has substantially reduced the level of official intervention in exchange markets since the third quarter of 2011", the Treasury said in a statement accompanying its semi-annual currency report to Congress in November.

Summers, a Harvard University professor and former president of the school, was Obama's adviser from 2009 to 2010 and served as treasury secretary from 1999 to 2001.

Speaking to reporters after his address, Summers said China was a "very, very long time away" from having an open, deep international market for the yuan. It would take a long time for the currency to expand its role enough to alter the dollar's role in the international market.

The International Monetary Fund in July repeated an assessment that the yuan was "moderately" undervalued while omitting a previous estimate of the magnitude of the gap. China disputed the assessment and said the yuan was "now close to equilibrium or, at most, slightly undervalued", according to an IMF report.

US Treasury Secretary Timothy Geithner said in May that further appreciation in the yuan was important to aid a reshaping of China's economy as significant as the nation's opening of its markets in the 1970s.

Summers also said US gross domestic product growth was probably about 1 per cent last quarter. The median estimate of analysts surveyed this month was for an annualised rate of 1.5 per cent.