Central Banker: China's Macro Policies Work

China has built an economic miracle over the past 30 years and its macroeconomic policies are nearly optimal, said central banker Yi Gang.

Since 1994, China has maintained high growth without significant inflation, Yi said July 15 in an exclusive interview with Caixin Media's China Reform Magazine.

Responding to questions about whether the nation's exchange rate reform program is moving too slowly, Yi, a deputy governor at the People's Bank of China, said "overall, the macroeconomic policies are very successful."

China returned to a managed floating system for the yuan's exchange rate in June after a de-facto peg to U.S. dollar that began in 2008. Yi said the latest decision was mainly based on China's domestic conditions.

At home, the effects of the global financial crisis are wearing off, he said, noting that the nation's 2009 GDP growth rate was adjusted recently to 9.1 percent from 8.7 percent by the National Statistics Bureau.

Overseas, the general forecast for economies in the United States, Europe and Japan point to 2010 as a recovery year, said Yi.

"Now is the right time to resume the exchange rate's flexibility," he said. "Although we can't say the crisis is behind us, and this year there is a European sovereign debt crisis, the overall economic condition is much better."

Criticism is mounting in the U.S. Congress over China's exchange rate. Lawmakers on Capitol Hill have blamed the yuan's valuation for America's trade imbalance.

"Historical experiences show that exchange rate is important, but it's not a decisive factor” in trade imbalance, said Yi. "What if after (the yuan's) appreciation, I buy things from you at a much cheaper price and meanwhile the trade surplus doesn't go down?"

The full interview appears in the August issue of China Reform Magazine and www.caing.com