Mundell says not to make RMB convertible too rapidly
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Nobel laureate in economics Robert Mundell said Thursday that China should not make the Renminbi convertible too rapidly.
"I tend to be ... conservative. Don't do it too rapidly," the "Father of Euro" told the audience of a lecture on the campus of the Chinese University of Hong Kong, saying that the gains from making the RMB convertible should be weighed against the losses.
The peg of the RMB has brought a lot of gains to China, he said.
China was once pushed on the convertibility issue some nine years ago. Had China made its currency convertible at that time, the gains would have been much less, he said.
Mundell became the fifth distinguished professor-at-large at the Chinese University of Hong Kong after the university created the post to attract renowned scholars to teach and provide leadership for the benefit of general academic advancement.
Mundell said one of the major implications of the recent economic crisis had been the harm done by the big swings in the exchange rates between the world's major currencies, and thereby, the need for a global monetary system.
Mundell said an Asian currency area that include China, Japan and other economies might still be possible by 2015 as the world moves toward larger currency areas.
He also said the United States might be repeating its mistakes of late 1960s and early 1970s in the policy pursuit of monetary expansion and tax increases. Instead, it should cut taxes to get as much production as possible out of the monetary expansion, which should be limited to a lesser extent, he insisted.
