The current level of the renminbi-dollar exchange rate has reached equilibrium and measures should be taken in the near term to maintain its stability, along with the gradual internationalization of the Chinese currency, a leading policy adviser said.
"The rapid renminbi appreciation that showed in the past few years is not likely to remain," Cao Wenlian, deputy secretary-general of the China Center for International Economic Exchanges, a top government think tank, told China Daily on Monday.
As China and the United States hold different opinions on the exchange rate issue, more channels of communication, both official and people-to-people, should be opened to promote understanding between the world's two largest economies, said Cao prior to the China-US Enterprises Investment and Cooperation Forum.
US Republican presidential candidate Mitt Romney recently raised the renminbi-dollar exchange rate issue as one of his campaign priorities.
He has pledged to label China a "currency manipulator" if elected.
"That is a short-sighted and unreasonable opinion based on Romney's political goal, which would inevitably damage China-US ties," said Cao, who called for further communication between the governments and think tanks of the two countries to clear up misunderstanding.
The origin of the China-US exchange rate "battle" is the trade imbalance, which requires the US government to lower fiscal expenditure, narrow the trade deficit by exporting more high-tech products, and focus on boosting domestic economic growth, according to the CCIEE economist.
According to data from the General Administration of Customs, the total export value from China to the US in the first half of this year was $165.3 billion, up 13.6 percent year-on-year.
China imported products from the US over the same period with a total value of $65.8 billion, an increase of 7.9 percent year-on-year.
"The recent US economic growth rebound has lifted the bilateral trade value by about 5 percentage points in the second quarter from the first three months," Zheng Yuesheng, head of the statistics department of the General Administration of Customs, said at a news conference last week.
Last year, the Chinese currency cumulatively appreciated by 5.11 percent against the dollar, according to the China Foreign Exchange Trade System.
Economists said that the renminbi's appreciation is likely to be slower than in 2011 due to weakened global demand and the cooling Chinese economy.
As China may maintain a GDP growth rate of between 7 percent and 8 percent in the medium and long term, while accelerating the transformation of its economic growth pattern, the currency is likely to fluctuate more than before, he said.
"In my opinion, the internationalization of the renminbi should not be so quick considering the potential risks in overseas markets," Cao said.
Now it is more important to support market-based interest rate reform in the domestic financial system and to encourage more Chinese banks and other financial institutions to develop business overseas, he added.
Policymakers are suggesting that the renminbi could be pegged to a basket of currencies, which would help reduce exchange rate fluctuation risks, according to Cao.
China's central bank released data last week which said that the country's total foreign exchange reserve had reached $3.24 trillion by the end of June, compared with $3.3 trillion in the first quarter, nearly two-thirds of which was investment in dollar-denominated assets and securities.
"The huge foreign exchange reserve should be used to purchase advanced technology and facilities, as well as to invest in international foreign exchange markets by launching State-owned investment companies," in order to avoid losses from renminbi appreciation, he said.