Robert Zoellick, World Bank President, said China increasingly recognizes that its industrial structure is out of balance with high profits accruing to state-owned enterprises accounting for much of the country’s extraordinarily high savings rate.
Revaluing the currency
Part of the reason for those profits, he said, is that state-owned Chinese banks lend to other state-owned companies at very low rates and pay Chinese depositors very low rates of interest.
World Bank chief economist Justin Lin, a Chinese national, also has attributed the profits to wages the companies pay, which he said are "depressed compared to the potential."
To the degree that China remakes its society to depend more on consumer spending, Robert Zoellick said, that ought to reduce the savings rate – and also could become an opportunity to revalue the currency.
That is because a stronger renminbi would increase the purchasing power of ordinary Chinese.
Wall Street Journal Online stated an appreciating currency would also send a signal to companies to focus future investment and capacity more toward domestic demand, whose purchasing power is being boosted, rather than producing for export.