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World Bank: Chinese Yuan Revaluing Necessary, But Not Panacea


World Bank President Robert Zoellick (Aug 2010 file photo)

World Bank President Robert Zoellick (Aug 2010 file photo)

The head of the World Bank says China should revalue its currency but says that alone will not solve global trade and financial imbalances. World Bank President Robert Zoellick also praises China for lifting a half a billion people out of poverty during the past 30 years.

Zoellick says his institution agrees with many economists in the United States and Europe, and the International Monetary Fund that China needs to revamp its exchange rate to make global markets fairer.

Cure-all?

But he warned Wednesday in Beijing that even significant revaluation of the yuan - which the U.S. and Europe say is kept artificially low to give Chinese manufactures an unfair export advantage - will not be a cure-all for trade imbalances.

"I share the view that the IMF has expressed that it would be appropriate to have an appreciation of the currency. But my point is that it would not be a panacea," he said.

Zoellick says the core of his discussions with China's top leaders - including President Hu Jintao - is how to increase Chinese consumption.

He says he discussed how China needs to rely less on exports for growth.

"These shifts will require structural changes as the Chinese authorities have recognized. The structural issues are the fundamental issues that have to be addressed," said Zoellick.

Economic makeover

He says at the same time, Americans and Europeans need to make structural changes to their economies, and do the opposite - save more and spend less.

He says cooperation instead of protectionism is required to avoid new shocks and damage already troubled global economy.

Zoellick spoke in Beijing at the end of his visit to mark the 30th anniversary of China's relationship with the World Bank.

Poverty reduction

He said during this period China has managed to lift half a billion people out of poverty - the largest number in history.

But he says challenges lie ahead, socially, economically and environmentally, as China seeks to join the ranks of high-income countries.

Zoellick says thanks to China, the global Millennium Development Goals set a decade ago to help the world's poor out of poverty will be met. He says the world has much to learn from China on reducing poverty.

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