The yuan needs to "adapt" to the vigor and strength of the Chinese economy, reflecting the spectacular growth of the country, said United States Treasury Secretary Henry Paulson in the latest edition of Veja, Brazil's leading magazine.
"We must encourage China to advance towards a more flexible currency, determined by markets actions, reflecting the economic fundamentals of the country, the vigor of its spectacular growth," said Paulson in the latest edition of Veja.
Paulson recently visited Brazil as part of a South American tour and his remarks are similar to those of Brazilian Finance minister Guido Mantega, who expressed concern over the "low artificial value" of the Chinese Yuan which is affecting Brazil's international competitiveness.
Mantega said the situation would be addressed directly with the Chinese government and included in the agenda of the IMF next annual assembly in October.
As to the sustained revaluation of the Brazilian currency, real, which so far this year has advanced 12.64% over the US dollar, Paulson said it must be seen "as something positive, since the Brazilian economy is doing very well, there's more confidence and this attracts more overseas capital."
"United States is interested in a strong dollar, but exchange rates must be determined by open markets reflecting the economic fundamentals of each country," he added.
Paulson described corruption as "a natural consequence of bureaucracy" and for this he recommended going ahead with "fiscal and labor legislation reforms."
"Brazil's challenge is to benefit from the good economic performance by reducing social inequalities investing in education and public services such as health and sewage," pointed out Paulson following last week's visit to Brazil.
The US official also underlined that the "lack of investment in infrastructure is a key issue" and questioned that the Brazilian public sector is bloated with 37 ministries. But I believe Brazil is in the right track. Interest rates are still high but they are coming down".
"If Brazil perseveres with the right economic policies, the effects in the event of a world crisis will be lower," said Paulson recalling the impact of the late nineties Asia/Russia financial crisis in South America's leading economy.