China should revalue yuan in its own interest: Basu

Chief Economic Advisor Kaushik Basu today said it was time for the Chinese government to revalue its currency yuan to improve the living standard of its populace.

“The exchange rate policy that China is following is not very good for the country. If I was the chief economic adviser of China, I would really, firmly tell government that it is time to revalue the yuan in the interest of the country itself,” Basu said at a function organised by economic think tank Icrier.

He further added that China’s standard of consumption could be improved beyond what the country was doing currently. “If you have undervalued the currency, it helps exports but hurts your imports. I think China no longer needs this to boost its exports. China has established itself as a major export player. So, it is a distortion when you are undervaluing the yuan,” added Basu.

Currently, Washington is arguing in favour of a market-linked pricing of the yuan as it feels that an undervalued yuan is giving China a significant trade advantage. An appreciation in the yuan might affect currencies of other nations, particularly that of emerging economies including India, which might see an appreciation if China decides to divest in the Indian rupee.