The Global Economy: China Pressured To Let Yuan Rise
WASHINGTON -- China came under more pressure to let its currency rise as Federal Reserve Chairman Ben Bernanke said flatly that the yuan is "undervalued . . . to promote a more export-oriented economy" and an International Monetary Fund study suggested that a currency move wouldn't harm Chinese growth if handled properly.</br></br>Mr. Bernanke, making his strongest comments on the subject in speaking before Congress's Joint Economic Committee, said, "It would be good for the Chinese to allow more flexibility in their exchange rate" to "address inflation and bubbles within their own economy" and to help bring more balance to a global economy in which China relies too much on exports and the U.S. too much on borrowing to import.</br></br>But Mr. Bernanke, responding to questions from China critic Sen. Chuck Schumer (D., N.Y.) also said that moving the exchange rate alone wouldn't have a major short-term effect on trade flows -- though "over time it would have an impact."</br></br>The Fed chairman's remarks come amid growing expectations that China will allow its currency to rise, perhaps before leaders of the Group of 20 industrialized and developing countries meet in Canada in June.</br></br>The U.S. Treasury recent postponed a decision on whether to label China a "currency manipulator," an apparent effort to give China some political breathing space to revalue its currency without appearing to bow to U.S. pressure.