The renminbi will continue to appreciate in the long run, although at a slower pace, despite recent turbulence in its exchange rate, Alan Greenspan, the former chairman of the US Federal Reserve, told Sina.com.
In an interview posted on Chinese financial news website on Friday, Greenspan said the Chinese government will keep the renminbi exchange rate at a low level in order to control the unemployment rate.
However, he said China should let inefficient companies go bankrupt, noting that “creative destruction” is the only way to generate strong productive forces and keep the economy healthy.
Greenspan also urged China to encourage investment in advanced technologies, as the country is relying too much on imported technologies.
Former premier Zhu Rongji said in the late 1990s that market freedom is necessary for economic growth, Greenspan noted, adding that the Chinese leader did not like state-owned enterprises (SOEs) because they were poorly managed.
The country’s current leadership has pledged to promote the market’s decisive role in the economy and vowed to pursue the reform of SOEs through the introduction of a diversified ownership structure.
Greenspan also warned about the potential risk from the country’s fast-growing shadow banking sector, which is said to be dealing with assets worth 15-20 trillion yuan (US$2.4-3.2 trillion), the report said.
Meanwhile, the former Fed chief said it’s still uncertain whether the US economy has recovered as unemployment is still higher than the natural rate of 5 percent while the property market is picking up slowly.
– Contact HKEJ at [email protected]