UPDATE 1-World Bank’s Lin: China revaluation would hurt US

* Lin says China makes labor-intensive things U.S. doesn’t

* Says rise in China currency would make goods more pricey

* Revaluation would depress US spending, employment
(Adds Lin comment on China growth.)

By James B. Kelleher

CHICAGO, May 15 (BestGrowthStock) – The chief economist for the
World Bank said on Saturday that if China were to revalue its
currency it would actually hurt rather than help the U.S.
economy.

Speaking to students on China’s role in the future global
economy, Justin Yifu Lin said critics who claim a purposely
undervalued Chinese currency is a hampering U.S. growth are
wrong.

He acknowledged that if China stopped selling renminbi and
buying foreign currencies, the policy that critics say keeps
the currency artificially undervalued, Chinese exports would
become more expensive.

But he said because most of the products China exports to
the United States are labor-intensive goods U.S. manufacturers
stopped making years ago, the U.S. would only have two choices:
buy the products from other countries or from the
Chinese.

Either way, Lin said, the cost of those goods would rise
for U.S. consumers and that would depress both consumer
spending and job creation in the United States.

He argued that goods made in other parts of the developing
world were more expensive than Chinese made goods because, if
they were not, the United States would already be buying
them.

Many economists — including some from the World Bank’s
sister organization, the International Monetary Fund — think
revaluing the currency is just one of several steps China needs
to take in order to shrink its massive reserves.

China would also need to adopt policies to encourage
domestic consumption, such as improving health care and other
social safety net services so that households would save less
and spend more.

Economists have warned for years that China’s large
reserves, currently more than $2 trillion, and large deficits
in countries such as the United States posed a threat to global
economic stability.

Lin joined the World Bank, which provides financial and
technical assistance to developing countries, in 2008 from the
China Center for Economic Research at Peking University.

A Chinese national, he is the first non-Westerner to serve
as the organization’s top economist.

Lin said he was not worried that China’s economy (Read more about the fastest growing economy.), which is
expected to grow by double digits this year, was in any danger
of overheating.

“I think the Chinese government — in general they have
weekly meetings, monthly meetings, watching all signs of the
macroeconomy — and in the past, we see the Chinese government
is able to do that kind of fine-tuning quite well.”
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(Editing by Doina Chiacu)

UPDATE 1-World Bank’s Lin: China revaluation would hurt US