Pressure from the United States for China to revaluate the Renminbi yuan was denounced as unreasonable by renowned bankers and experts here Tuesday at the Fortune Global Forum 2005.

The topic of the U.S.'s demand for a revaluation of the Chinese currency was so hot that it was debated at several of the forum's sessions, including Understanding China's Capital Markets and The Falling Dollar's Global Impact.

Stuart T. Gulliver, chief executive of corporate investment banking and markets at HSBC, said the United States has a number of economic problems itself, including a massive current account deficit and a low savings rate, a re-evaluation of the RMB would not be enough to solve the US trade problem.

"US trade with China represents only 10 percent of its total trade. If China was to revaluate its currency, hypothetically by 25 percent, it would only improve the US dollar on a trade- weighted basis by about 2.5 percent -- not enough to solve the US trade problem," he said.

He said consumers in the United States should stop consuming so much and start saving, in what he described as the second measure to address the US current account deficit in addition to letting the dollar depreciate.

Kevan Watts, chairman of Merrill Lynch International Inc., held that the importance of the exchange rate of the Chinese currency has largely been overstated.

A couple of speakers at the forum acknowledged that growing pressure from the United States on China to adjust the exchange rate of the RMB is more of a political matter than an economic one.

Managing Director and Chief Economist of Morgan Stanley, Stephen S. Roach, said that U.S. Congressmen do not want to hear from anybody who does not feel that the Chinese currency is undervalued and that China should be severely pressured to alter its policy. What they care is how many votes they can get in the next election.

Li Jiange, deputy director of the Development and Research Center of the State Council, or the central government, said China always treats political and economic issues separately, while the U.S. government always politicizes economic issues, which is not conducive to solving problems.

Since December 2002, he noted, the U.S. dollar has depreciated 38 percent against the euro and 24 percent against the Japanese yen, the major reason for which is its trade and fiscal deficits.

"It's unrealistic for the U.S. to solve its own problems by way of forcing other currencies to revaluate," he said, adding China's savings rate is two to three times that of the U.S., and even if its trade deficit with China is removed, it will be exhibited in trade with other countries.

On the timing for changing the currency exchange system, Gulliver said it should be when "the Chinese authorities feel it's right to make that decision. ...It should be carefully sought out and done in a very measured way."

As for what foreign exchange regime China should move to, he said this is obviously a decision for the sovereign country to make.

When asked by the press about the risk for China of adjusting its exchange rate, Gulliver said "the danger would be that any straightforward change against the US dollar would not be seen as enough by the marketplace, and would just bring renewed speculation."

Chinese premier Wen Jiabao said Monday that his country would never yield to outside pressure on its currency exchange rate.

"The reform of the RMB exchange rate system is a matter of China's sovereignty and any pressure and speculative exploitation of the issue or any attempt to turn the economic issue into a political one will not be conducive to resolving it," the premier said during his meeting with members representing the US Chamber of Commerce.

But he promised as long as conditions are ripe, the Chinese government will take the initiative to advance the reform without any pressure from outside the country.

Source: Xinhua