Bloomberg News

Donald Kohn Says China Will Need to Let Yuan Fluctuate

February 07, 2012

(Updates with Treasury report in third paragraph.)

Feb. 7 (Bloomberg) -- Donald Kohn, a former vice chairman of the Federal Reserve, said “the Chinese will need to allow the exchange rate to fluctuate.”

“They’ll need to grant independence for the People’s Bank of China to run an independent monetary policy aimed at macroeconomic stability,” Kohn said during a panel discussion at the Brookings Institution in Washington today. He is now a member of the Bank of England’s Financial Policy Committee.

The Obama administration says China uses an undervalued currency to give its exporters an unfair advantage in overseas markets. The U.S. Treasury Department, in a December report, called for China to adopt “greater exchange-rate flexibility.”

Chinese Vice President Xi Jinping, who is set to become the next general secretary of the Chinese Communist Party later this year and to succeed Hu Jintao as president in March 2013, is scheduled to visit Washington next week.

Stephen Roach, non-executive chairman of Morgan Stanley Asia, said he is concerned that both Republican and Democratic lawmakers are blaming China for U.S. unemployment.

The U.S. had trade deficits with 88 countries in 2010, proving that it has a “mulitlateral problem” that can’t be fixed by adopting measures against China, Roach said on the panel.

--Editors: Kevin Costelloe, James Tyson

To contact the reporter on this story: Ian Katz in Washington at

To contact the editor responsible for this story: Kevin Costelloe at

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