Official: Undervalued yuan to blame for overheating

National Bureau of Statistics director Xie Fuzhan projected GDP growth for 2007 at be 11.5% in a lecture at Tsinghua University's School of Economics and Management in Beijing on Thursday, China Business Net reported (in Chinese). In the lecture, Xie attributed China's overheating economy and structural imbalances such as a large trade surplus and excessive capital investment to the fact that the yuan is not appreciating fast enough to keep up with increases in domestic productivity. The undervalued yuan has led to imbalances such as trade subplus and excessive capital inflows by keeping domestic energy, resource, labor and land prices low, said Xie. The basic means of cooling the economy is to improve the exchange rate system and make the yuan more flexible, he said.