CHINA could be about to allow its currency to strengthen by as much as five per cent to slow down the country’s fast-growing economy, Goldman Sachs’ chief economist said yesterday.
“I have a strong opinion that they’re close to moving the exchange rate,” Jim O’Neill told Bloomberg. “Something’s brewing. It could happen anytime.”
O’Neill believes China may allow the yuan to rise as much as five per cent in a one-time revaluation and to then trade within a bigger band or against a larger basket of currencies.
“They need to do something to slow the economy down and deal with the inflation consequences,” he said. O’Neill believes China’s economy is growing between 12 per cent and 14 per cent. The World Bank has forecast China’s economy will grow nine per cent this year, faster than global growth of 2.7 per cent. Beijing said it expanded by 8.7 per cent in 2009. World stocks slumped and the dollar hit a seven-month high on Friday after China’s move to tighten monetary policy raised fears it would hurt a global economic recovery.