* Says in China's interest to revalue yuan
* Says from global perspective, should happen soon
* Says no doubt global economy recovering
HELSINKI, June 16 It is in China's interest to
revalue its currency, and from the point of view of the rest of
the world it should happen as soon as possible, the
International Monetary Fund's top economist was quoted as
"Some sectors in China are overheating and workers are
demanding more pay. They (authorities) don't want the inflation
risk to grow," IMF Chief Economist Olivier Blanchard said in
Finnish business paper Kauppalehti on Wednesday.
"I don't know when and by how much the yuan will be
revalued, but I believe it is in their (China's) interests. For
the rest of the world it is important that it happens as soon
as possible," he said.
"For the world economy to get healthy, we need the U.S.
current account deficit to be cut."
With many U.S. lawmakers facing re-election in November and
unemployment hovering just below 10 percent, pressure is
building on President Barack Obama's administration to push
China to break the yuan's nearly two-year-old peg to the
Although many economists believe yuan appreciation would do
little to reduce the overall U.S. trade deficit, a vocal group
of lawmakers in Washington says an undervalued currency
subsidises Chinese exports at the expense of U.S. firms and
Blanchard also said it was clear the global economy was on
a growth path, and actions taken to halt the spread of the debt
crisis from Greece had been effective.
"The real economy is recovering, of that there is no doubt.
If anything the recovery has been stronger than we have
forecast," he said.
"Because of all the actions taken I am quite hopeful that
serious consequences of the Greek crisis on the financial
markets can be avoided."
Blanchard said it was important countries put their
economies on more sustainable footing, focusing on establishing
credible mid-term recovery programmes that could include
pension system reforms or raising the retirement age.
"What must be avoided is that all countries try to reassure
the marketsby cutting in a crazy way this year. That would be a
big mistake," he said.
Blanchard added that it was clear monetary policy could not
be enforced solely by inflation targets, and said he stood
behind his idea earlier this year that central banks could
consider doubling their inflation targets.
"It's clear that just an inflation target is no longer
enough in monetary policy. You have to look at asset prices,
indebtedness and many other factors," he said.
(Reporting by Brett Young; Editing by Neil Fullick & Kim