On September 6, Robert A. Mundell, a famous Canadian economist, winner of the Nobel Prize in economics and the father of A Theory of Optimum Currency Areas, gave a report entitled "The Evolution of the International Monetary System and Its Relationship with China" at the Capital University of Economics and Business in Beijing.

According to the report, a healthy Chinese economy will play an increasingly important role in the world's monetary system. However, the RMB should not undergo forced appreciation.

The report also said that RMB can not be converted because of exchange restrictions, which has some effect on the floating exchange rate. The current exchange rate between US$ and RMB is quite healthy (1:8). Furthermore, China's foreign exchange reserves are growing rapidly; China has now overtaken Japan as the country with the largest forex reserves. The Chinese government should relax restrictions on forex and adapt a more flexible policy.

Professor Mundell said it was unprecedented that inflation did not occur while the Chinese economy maintained a growth rate of 8 to 9 percent. He also predicated that the RMB would replace the Japanese yen by 2030 as world's third important currency.

By People's Daily Online