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Experts Debate China Currency Value

Scholars at Washington's Carnegie Endowment for International Peace disagree on whether or not China is manipulating its currency to gain advantages on foreign markets.

Former World Bank and U.S. Treasury economist Albert Keidel conceded Thursday China's currency may be undervalued but not seriously so. With the United States enduring a huge trade deficit with China, many in Congress argue that a cheap currency provides China with an excessively generous price advantage in U.S. markets.

Mr. Keidel, Carnegie's resident expert on China's economy, says China is being blamed unfairly. "These unsubstantiated claims that China's exchange rate is unfairly undervalued are major components of a pattern demonizing China, a pattern that has swept Washington. This demonization of China seriously threatens America's long-term security interests. It threatens to persuade America that containing China rather than engaging China is in America's best interests," he said.

Prior to 2001 Mr. Keidel was a World Bank economist in Beijing.

Morris Goldstein of the Institute for International Economics, a Washington research group, strenuously disagrees. He estaimates that even after China's two percent revaluation last July the currency is still undervalued by from 20 to 40 percent. He cites official statistics showing that the Chinese authorities deliberately intervene in the markets to hold down the currency's value.

"Indeed, the only person in the world I've seen who characterizes the Chinese exchange rate as market determined is Bert Keidel. I mean $19 billion a month they're (spending) intervening. And that's regarded as a market determined exchange rate? Not in my experience," he said.

Mr. Goldstein, who spent 24 years at the International Monetary Fund, believes that both the Fund and the U.S. Treasury were influenced by political factors when they recently concluded that China's currency was not unfairly manipulated. In Mr. Goldstein's view, it is both unfairly manipulated and seriously undervalued.