Yuan reform will give China more spending power

Mumbai: Given the economic crisis in the euro zone and the US, an upward revaluation of Chinese currency Yuan will help China have more spending power and create a more balanced global economy, a noted financial expert said.

"The upward revaluation of Yuan, which is a necessity, will help China have more spending power. They will be able to buy more American products, European products and Indian products. Because of the size of the population and the size of the economy, this will have a major impact around the world," Global online foreign exchange trading service provider Alpari (UK)'s Research head George Tchetvertakov told PTI here.

"There is no doubt that the Yuan must be revalued. But they will not revalue it in market terms. It will be done artificially and slowly. But the revaluation will create a massive inflow of dollar to the country. This will help in rebalancing the global economy," he said.

Citing the US as a great driver of growth, Tchetvertakov said that the country's reliance on China will lead trouble in the long term.

"The US is a great growth driver. The momentum of growth comes from the US and the EU. But considering America's too much reliance on China, it would be in a long term trouble," he said, adding, "Eventually China will outdo the US in GDP."

On the rising labour costs in China, he said that it will drive further inflow into China and slowly help China gain more prominence in the currency market.

"Now, the foreign exchange market is dominated by dollar. Almost 85 per cent of the transactions are in dollar. This is obviously subject to change. When the US losses some prominence, China will gain from that," he said.