A senior Chinese researcher has suggested the government use its huge foreign exchange reserves to increase imports in order to maintain the country's stable economic development on a long run.

China should use its foreign exchange reserves, which currently stand at 659.1 billion US dollars, to buy stock ownership of resources overseas to ensure supply in the future, said Wang Jian, deputy secretary-general of the Society of the Macroeconomy of China, as quoted in Friday's China Securities Journal.

Resource shortage is a problem China faces in its current economic development, he said.

Wang also suggests the government encourage more domestic enterprises to list in Hong Kong and other overseas capital markets and then use the funds raised to acquire more resource ownership overseas.

If China can now purchase more than one trillion US dollars- worth of resource ownership, there will be no problem for China to maintain stable economic growth in the next dozen years, he said.

He has also called for maintaining the current interest rate, saying that it is of little use increasing the interest rate to control commodity prices or to check the real estate industry bubble.

Changing the interest rate will only further encourage the influx of "hot money" into China, which is gambling on floating the Chinese currency, the yuan, sometime soon.

He also disagrees with the move to float the yuan, which is currently pegged to the US dollars, saying that the revaluation will hurt China's export industry, which is one of the two key factors in maintaining the country's current high economic growth.

According to Chinese experts, export growth will drop to below 10 percent this year if the yuan's value rises by 5 percent against the US dollar.

Floating the yuan will also have a negative impact on the currencies of other Asian countries, which might possibly lead to the collapse of the US dollar.

"If the US economy sees big trouble, the whole world will be hurt too," noted Wang.

The People's Bank of China, the central bank, reiterated in a report issued on Thursday that China will keep its currency " basically stable at a rational equilibrium" while improving the regime that determines the yuan's exchange rate. Currently, one US dollar equals 8.27 yuan.

The report acknowledged that China's monetary policy is being challenged severely by the trade surplus and rapid growth of foreign currency reserves in the first quarter of the year, which amounted to as much as 49.4 billion US dollars,

Some countries, including the United States and members of the European Union, have been claiming that the yuan is too low, giving Chinese exporters a trade advantage.

The central bank promised to further deepen the reform of foreign exchange management and promote the balance of international payments.

Source: Xinhua