Nation can expect escalating screams of horror from Europe and Japan, a leading US economist warns There are indications that the mainland's economy will face increasing pressure in the coming months as foreign governments intensify their campaign to force a revaluation of the yuan. Two top foreign economists are forecasting trouble, especially if the US dollar, which the renminbi is pegged to, continues its downward trend against the yen and the euro. The yen rose to a three-year high against the dollar this week, even after the Bank of Japan sold yen to prevent the rises from holding up Japanese economic growth. 'China can expect escalating screams of horror from Japan and Europe,' Donald Straszheim, a former chief economist at Merrill Lynch in New York, said. 'The world will gang up against China on [this] fixed exchange rate practice.' Mr Straszheim said he believed the greatest risk to the mainland's economic advance was 'its primitive systems, lack of understanding of the realities of global competition and financial-sector naivete that magnifies an accident into a cumulating shock'. Despite calls from the US, Japan and the Group of Seven industrialised countries for the renminbi exchange regime to become more flexible, the central government has refused to compromise, stating that 'renminbi stability is good for the nation as well as the region'. Andy Xie, chief economist for Morgan Stanley in Asia, said he did not foresee the US Congress going ahead with a proposal to slap a 27.5 per cent tariff on all Chinese imports. But he said that legislators, pressured by US manufacturers, might impose higher tariffs on selected products, such as textiles and certain commodities. 'Many US manufacturers know that the result of a modest renminbi appreciation would either result in no change in their competitive positions or simply shift demand to other low-cost countries,' Mr Xie wrote in a report this week. 'This is why they want quantitative measures or high tariffs on selected products. 'US manufacturers appear to be using China as an easy target for pushing the US towards protectionism in general.' To offset foreign pressure, mainland financial regulators have begun loosening capital controls that have for years protected the nation from a massive capital flight. Officials hope that measures, such as raising the cap on the amount of US dollars tourists can take abroad from $3,000 to $5,000 and allowing citizens to buy a variety of foreign currency in addition to the dollar, will alleviate foreign pressure. However, Mr Xie said he believed that officials needed to do much more to avoid a trade war in the coming months. 'For example, major purchases of agricultural commodities could win goodwill from politically important states,' he said. 'Second, China could announce a timetable for phasing out all tax privileges for foreign investors. China's cost structure is low enough to attract foreign direct investments without concessions. 'Third, China could open up more sectors to foreign investment. Foreign direct investment into China's financial sector could improve financial efficiency and rope western interests further into China's development process. Fourth, China should announce a timetable for opening its capital account.'