PARIS, April 7 (Reuters) - The Chinese yuan should rise in value but this cannot happen overnight, OECD chief economist Pier Carlo Padoan said on Wednesday.
The Paris-based Organisation for Economic Cooperation and Development stated the case for yuan appreciation in a report it presented in Beijing in February, said Padoan, who was fielding questions at a news conference on new economic forecasts. "We of course all know there is one key currency we recommend should move from its current level and start appreciating. Of course I am thinking about the Chinese currency," he said.
In an interview with Reuters, Padoan made it clear the OECD did not expect this to happen suddenly, however.
"What we are also saying is that the need for revaluation of the exchange rate reflects adjustment in the macro variables," he said.
"In the case of China we recommend lowering the savings rate through reforms that address the welfare system and the financial system so that the very high savings rates of households and of state-owned enterprises goes down and therefore rebalances the savings and investment gap."
"The revaluation should not happen overnight. Otherwise it could create problems. A revaluation which is sustainable requires sequencing of reforms...that takes some time."
China revalued the yuan by 2.1 percent against the dollar in July 2005 and then let it rise almost 19 percent further before calling a halt in mid-2008 to help its exporters ride out the global financial and economic crisis.
U.S. politicians are spearheading calls for a rise in the yuan, which they, European politicians and a large number of economists say is artificially undervalued, giving China an unfair price advantage in world export markets.
In its February report, the OECD said China would eventually
require a flexible exchange rate regime with open capital
markets and suggested a first step would be to link the yuan