Reassuring review

(China Daily)
Updated: 2010-07-29 15:33
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The International Monetary Fund's lavish approbation of China's determined policy response to the worst global recession in more than half a century seems well deserved. Had China not reacted so quickly and effectively to the crisis two years ago, the IMF would not have been able to revise upward its world growth forecast, which have been largely underpinned by strong Chinese growth data.

Despite sluggish US recovery and the euro zone sovereign debt crisis, the IMF recently raised its forecast for world growth by 0.4 percentage points, to 4.6 percent in 2010.

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The robust rebound of the Chinese economy and its positive effect on global trade has definitely led to such a rosy assessment, but it should not be left at that.

Efforts must now be made to de-link the renminbi exchange rate issue from China's overall economic performance, and explain the negative impact that drastic fluctuation in the foreign exchange markets can exert on fragile global recovery.

Those who have obsessively urged that the yuan be revalued have obviously failed to recognize the role played by a stable yuan in restoring global financial stability during the crisis.

By exaggerating the currency issue, some developed nations are trying to avoid painful but necessary domestic reforms.

For China, a more flexible renminbi may indeed help tame short-term inflationary expectations and facilitate a long-term shift further away from exports and investment to domestic consumption as the key driver of economic growth.

But that should never be an excuse for debt-laden developed countries to drag their feet on a crucial and complete economic and financial overhaul.