January 9, 2012 / 8:01 PM / 6 years ago

Chinese economist says yuan appreciation could stall in 2012

NEW YORK (Reuters) - China’s economy won’t crash but a shrinking trade surplus will likely keep its currency, the yuan, from appreciating over the next year or two, a Chinese economist said on Monday.

Huang Yiping, economics professor at the China Center for Economic Research at Peking University, told a conference in New York it would be hard to argue that the yuan was undervalued when the trade surplus was only 2 percent of China’s GDP.

“In the long run I think the currency should still appreciate but the potential currency appreciation might be more limited in the short term,” Huang said.

“Be careful what you look for from China. I suspect the currency will be going down for a little while.”

The U.S. has long pressured China to let the yuan appreciate against the dollar. Chinese officials have said they will let the currency strengthen gradually, so as not to disrupt the country’s economy.

The debt crisis in Europe and some recent brighter U.S. economic data helped cause a strengthening in the dollar and a slight weakening in the yuan’s value at the end of 2011 and into early 2012.

The yuan posted its fourth straight day of losses on Monday, as the Chinese central bank set a weaker mid-point in response to the strong rise in the dollar, which neared a 16-month high against the euro on Friday.

Chinese economists do not strictly represent government policy and some even differ with official positions, within limits. But on many issues, their comments reflect or amplify official opinions.

Huang, who is a deputy director of Peking University’s China Macroeconomic Research Center, was one of seven Chinese economists appearing at the National Committee on United-States-China Relations’ annual economic outlook conference at the New York Stock Exchange.

“Rebalancing is happening in China,” Huang said, citing a slowdown in housing and a dearth of solid investment opportunities in the Chinese stock market. “You don’t really want to keep your money in China.”

The economists at Monday’s conference addressed growing fears among some U.S. investors that China’s economic growth could slow abruptly, that its housing market could crash or that its ballooning shadow-banking industry could cause a financial crisis.

Their overall tone was one of cautious optimism. The housing market slowdown was underway, argued Zuo Xiaolei, chief advisor to the president of China’s Galaxy Securities Company, but it was a result of a strictly enforced government policy, not a bursting bubble.

Questions from the audience included queries about reported “ghost cities” in China - swathes of real estate developments that have not yet been sold nor lived in - and whether they are a serious problem.

“The vacancy problem is grossly overstated by big China bears,” Huang responded, adding that he had seen areas of empty buildings in Inner Mongolia, but didn’t think it was a “national problem.”

One audience member who described himself as the chief compliance officer at a securities broker-dealer in New York and an independent director on the board of a small Chinese pharmaceutical company in Harbin said he faced constant questions about whether the Chinese company’s profits were real or whether they were based on flawed or fraudulent accounting.

“I think that something that’s really really important, from a specific time frame, to have specific confidence in those numbers. Trust is the number one thing,” the questioner said.

”I think we do have lots of problems in terms of quality of data including the accounting system you just mentioned,“ Huang said. I can’t really put all of my assets on in betting that the numbers are reliable.”

Additional reporting by Paul Eckert; Editing by Andrew Hay

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