China's exchange rate policy has no impact on the US trade deficit, said Joseph E. Stiglitz, Nobel laureate for the economic science in 2001 when he delivered a speech on China's 11th Five Year Plan in Peking University on March 16.

Though US politicians blamed China for the trade deficit, all economists know trade deficit means the imbalance of macro-economy, so the massive trade deficit of the US was caused by American household debts and huge fiscal deficit, said the Nobel laureate.

It has become increasingly clear that China will heavily rely on domestic demands, but not exports, commented Stiglitz on China's 11th Five-Year plan.

Stiglitz holds China should improve its social security system faster so that residents would be less motivated to saving to stimulate domestic demands. A strong health care system as well as an unemployment insurance system in the whole country particularly in rural areas should also be established.

Stiglitz has noticed that encouraging independent innovation is one of the highlights in China's 11th Five-Year Plan.

In the meantime, he also warned that monopoly brought about by intellectual property rights has distorted market and raised social costs. Take medicine for example, when some kind of life-saving medicines are monopolized, the cost is tremendous.

He thinks such behavior is quite serious in developing countries like China. Developed countries would usually resort to compulsory licenses to curb improper market behavior by bypassing intellectual property rights, said Stiglitz.

Stiglitz reminds that only when innovation benefit brought by intellectual property rights is more than enough, the huge cost comes from it can be acceptable. Excessive or imbalanced protection on intellectual property rights will actually slow down the pace for innovation.

Stiglitz also suggested China avoid copying the deficiencies of market economy, at least know what the deficiencies are, and seek to avoid them or find alternative approaches when pursuing market economy system.

By People's Daily Online