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Revalued Chinese currency could hurt USA

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Economists that have long criticised China’s fixed currency for offering the export-oriented economy an unfair trade advantage are now saying a floating Chinese currency could hurt the US economy. Justin Yifu Lin, Chinese national and chief economist at the World Bank, has told students that if China were to revalue its currency at its true worth, exports would become more expensive and raise prices for US consumers. Lin warns that this could depress consumer spending and slow US recovery. Lin’s position stands in opposition to economists at the International Monetary Fund, which have proposed that a revaluation of China’s currency would help shrink its massive reserves and restore balance in the global economy. China has reserves of more than US$ 2 trillion, in comparison to a US deficit projected to reach $20 trillion by 2015. China has also been criticised by Singapore and some European countries for its currency position. Singaporean finance minister Tharman Shamnugaratnam believes it is in China’s best interest to let their currency rise. He said allowing the yuan to gradually appreciate would help tamp down worldwide inflation, which was of "increasing concern" in China. He believed that an appreciating currency would help lift living standards in China and increase productivity 'that goes with a  stronger exchange rate". US President Barack Obama has repeatedly urged China to adopt a "more market-oriented exchange rate", however has demonstrated unwillingness to take action on China; in the interests of improving US-China relations, opting to delay a report into Chinese currency manipulation, originally slated for release on April 15. China has stridently defended their fiscal policy, with deputy governor Su Ning, of the Chinese central bank, responding: "We always refuse to politicise the yuan exchange rate issue and we never think that one country should ask another for help in solving its own problems." As chief economist at the World Bank, Lin has significant influence. This latest statement provides weight to China’s claims that a revalued Chinese currency would hinder world recovery, rather than fuel it. This is based on the reality that over the past decades, the yuan devaluation has given Western countries access to cheap consumer goods, which raises living standards and boosts domestic consumption.

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