The current level of the renminbi-dollar exchange rate has reached equilibrium and measures should be taken in the near term to maintain its stability, along with the gradual internationalization of the Chinese currency, a leading policy adviser said.
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"The rapid renminbi appreciation that showed in the past few years is not likely to remain," Cao Wenlian, deputy secretary-general of the China Center for International Economic Exchanges, a top government think tank, told China Daily on Monday.
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As China and the United States hold different opinions on the exchange rate issue, more channels of communication, both official and people-to-people, should be opened to promote understanding between the world's two largest economies, said Cao prior to the China-US Enterprises Investment and Cooperation Forum.
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US Republican presidential candidate Mitt Romney recently raised the renminbi-dollar exchange rate issue as one of his campaign priorities.
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He has pledged to label China a "currency manipulator" if elected.
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"That is a short-sighted and unreasonable opinion based on Romney's political goal, which would inevitably damage China-US ties," said Cao, who called for further communication between the governments and think tanks of the two countries to clear up misunderstanding.
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The origin of the China-US exchange rate "battle" is the trade imbalance, which requires the US government to lower fiscal expenditure, narrow the trade deficit by exporting more high-tech products, and focus on boosting domestic economic growth, according to the CCIEE economist.
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According to data from the General Administration of Customs, the total export value from China to the US in the first half of this year was $165.3 billion, up 13.6 percent year-on-year.
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China imported products from the US over the same period with a total value of $65.8 billion, an increase of 7.9 percent year-on-year.
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"The recent US economic growth rebound has lifted the bilateral trade value by about 5 percentage points in the second quarter from the first three months," Zheng Yuesheng, head of the statistics department of the General Administration of Customs, said at a news conference last week.
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Last year, the Chinese currency cumulatively appreciated by 5.11 percent against the dollar, according to the China Foreign Exchange Trade System.
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Economists said that the renminbi's appreciation is likely to be slower than in 2011 due to weakened global demand and the cooling Chinese economy.
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As China may maintain a GDP growth rate of between 7 percent and 8 percent in the medium and long term, while accelerating the transformation of its economic growth pattern, the currency is likely to fluctuate more than before, he said.
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"In my opinion, the internationalization of the renminbi should not be so quick considering the potential risks in overseas markets," Cao said.
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Now it is more important to support market-based interest rate reform in the domestic financial system and to encourage more Chinese banks and other financial institutions to develop business overseas, he added.
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Policymakers are suggesting that the renminbi could be pegged to a basket of currencies, which would help reduce exchange rate fluctuation risks, according to Cao.
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China's central bank released data last week which said that the country's total foreign exchange reserve had reached $3.24 trillion by the end of June, compared with $3.3 trillion in the first quarter, nearly two-thirds of which was investment in dollar-denominated assets and securities.
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"The huge foreign exchange reserve should be used to purchase advanced technology and facilities, as well as to invest in international foreign exchange markets by launching State-owned investment companies," in order to avoid losses from renminbi appreciation, he said.Â