IMF economist says higher yuan will help

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WASHINGTON, Feb. 16 (UPI) -- A higher Chinese yuan will help the U.S. economy but more is needed to sustain the U.S. growth, an international economist told Xinhua.

Olivier Blanchard, chief economist of the International Monetary Fund, told the official Chinese news agency in an interview that a 20 percent appreciation of the yuan and a similar appreciation of the exchange rates of currencies of other emerging Asian economies could help boost the U.S. gross domestic product by about 1 percent.

"This would be good news for U.S. growth. But this is clearly not enough, by itself to sustain growth in the United States," Blanchard said.

The yuan issue has resurfaced as the administration of U.S. President Barack Obama battles massive deficits and unemployment. An undervalued yuan is seen by the administration as giving China an unfair trade advantage by making its exports cheaper and imports from countries such as the United States more expensive.

Blanchard told Xinhua a discussion on China's macroeconomic policy should begin its saving rate and not its exchange rate.

"There is wide agreement that the current Chinese saving rate is too high, that it reflects insufficient social insurance for households, governance problems in firms, and low financial access," he told Xinhua.

He said China should spend more in areas such as healthcare and the retirement system and take steps to boost domestic demand to avoid over-heating of the economy.

Blanchard said as China seeks to reduce its saving rate, the United States should try to reduce its budget deficits, adding an increase in U.S. exports would make it easier for the U.S. government to reduce its stimulus measures.