China's currency is probably overvalued, not undervalued as Washington complains, a state-run Chinese newspaper said on Thursday, advancing Beijing's push against US demands to loosen up the yuan.
China has come under renewed pressure from Washington to free up controls on the yuan's exchange rate, which many in the US Congress contend is grossly undervalued, unfairly squeezing out competition against cheaper Chinese goods.
A commentary in the overseas edition of the People's Daily, the chief newspaper of the ruling Communist Party, took the opposite view.
"Currently, the renminbi exchange rate does not have a problem of being undervalued; on the contrary, it may be overvalued," said the commentary by Xie Taifeng, an economist at the Capital University of Economics and Business in Beijing.
China's consumer prices have risen by 68.8 percent since 1994, when the government brought in a single yuan currency, wrote Xie. Until then, China operated a separate system of yuan specifically for foreign exchange and use by foreigners.
Over the same time, Xie wrote, China's inexpensive exports helped to hold down inflationary pressures in the United States.
"Therefore, according to purchasing power parity theory, the exchange rate of the renminbi against the dollar should not appreciate, and instead it should depreciate."
Xie's argument is unlikely to win many backers in Washington.
Beijing is facing international calls to let the yuan resume rising after effectively repegging the currency at about 6.83 to the dollar to help its exporters ride out the global credit crunch.
Complaints eased over the last two months as the euro zone debt crisis took center stage. But US Treasury Secretary Timothy Geithner said last week that the yuan was an impediment to global rebalancing, suggesting that US patience with China's currency policy was wearing thin.