Monetary system has to be restructured

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(China Daily)
Updated: 2009-09-25 08:27

As the global economy shows signs of revival, the US dollar seems to be heading toward a decline. The resultant pressures for the revaluation of the yuan calls for timely action to reconstruct our monetary system and encourage sustainable development, says an article in Shanghai Morning Post. Excerpt:

With the help of the US government-backed "clunker program", the country's retail industry made its biggest gain in three and half years last month, prompting US Federal Reserve Chairman Ben Bernarke to say that the American economic crisis may soon be over.

But as the US economy inches toward recovery, the fall in the value of the dollar becomes more likely. To stimulate its economy, the US government increased currency supply massively. Although the greenback's value in the market has been suppressed by the bleak economy, it is bound to fall into inflation in the long term.

That will create more pressure on the yuan. Although the revival of the US consumers' market has not been reflected in China's export earnings until now, a number of foreign exchange reserves will sooner or later be accumulated if the trend continues. It's then that China will be under more pressure to raise the value of the yuan.

As the third largest economy, China should seize this opportunity to reconstruct its monetary system in order to upgrade its industrial structure.

We should upgrade our industries and invest more in the creative and technological sectors to increase productivity and enhance our market advantage. Besides, we also need to pay attention to the transformation of our labor market. Our labor cost is bound to increase, which in turn will raise the cost of "made in China" products.

This shows that maintaining the low costs of our products cannot be a long-term, profitable solution. So we need to prepare for a series of post-economic-crisis challenges to travel the path of sustainable development.

(China Daily 09/25/2009 page9)