Government economist: RMB appreciation must precede rate hike

A government economist said that China must allow the renminbi to appreciate before raising interest rates, Bloomberg reported. Zuo Chuanchang, of the Academy of Macroeconomic Research, an affiliate of the National Development and Reform Commission, said allowing the renminbi to strengthen would deter speculative inflows and make tightening efforts more effective. "Raising interest rates while keeping the yuan’s exchange-rate fixed would only attract more capital," he said, as investors bet on future gains in the renminbi’s value. Beijing has so far resisted calls to appreciate the currency, but Zhu Min, deputy governor of the People’s Bank of China, said recently that China would consider revaluing the renminbi when other countries remove stimulus packages.