China needs to run a continued fiscal deficit and let its real exchange rate rise to rebalance its economy towards domestic demand and thus sustain the impressive growth of recent years, the OECD has said.
In its Economic Survey of non-member China, the OECD maintained its November forecast of an acceleration in gross domestic product growth to 10.2 percent in 2010 from 8.7 percent last year. China should let its currency rise to cool inflation and help ease economic distortions as it emerges from the global crisis, the OECD said.
A stronger currency, coupled with more social spending, could help to reduce China’s high savings rate, boost consumer spending power and narrow its trade surplus. .It is appropriate for the exchange rate to appreciate,. said Deputy Secretary-General and Chief Economist Pier Carlo Padoan.
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