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UPDATE 1-PBOC's Fan sees dollar depreciating in long term

Published 12/21/2009, 03:17 AM
Updated 12/21/2009, 03:21 AM

* U.S. economy expected to remain sluggish for a long time

* Fan sees U.S. dollar losing more value in future

* Fan says problem involves U.S. currency and debt (Adds details)

SHANGHAI, Dec 21 (Reuters) - The U.S. dollar will continue to depreciate over the long term and the world's largest economy is expected to remain sluggish for a long time, said Fan Gang, an adviser to the Chinese central bank.

"This crisis is a U.S. dollar crisis, which takes a relatively long time to clear up. The problem involves the U.S. currency and U.S. debt; eventually it has to be solved through U.S. dollar depreciation," Fan, a member of the People's Bank of China's monetary policy committee, told a financial forum on Monday.

He said it would typically take two years for an economy to recover from a crisis. As only a year had passed, it was too early to say whether the U.S. economy had emerged from the financial crisis.

"The U.S. economy will, in the long term, remain sluggish. It will be difficult for developed countries to recover soon," he said.

Fan said that in the long run there would be a decoupling between the U.S. economy and the economies of emerging countries.

There was ample liquidity in the United States, he said, but little demand because of poor expectations for future economic prospects.

"This time, the U.S. economy will recover very slowly," he said. "In the long term, the U.S. dollar will definitely depreciate, although in the short term there will be fluctuations." (Reporting by Samuel Shen and Jacqueline Wong; Editing by Chris Lewis)

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