At a forum sponsored on Saturday by the Shanghai-based Fullgoal Fund Management Company, Mundell said it was utterly necessary for China to open its capital market and make the yuan convertible if it was to attain a sustainable economic growth.

He said that a strong and competitive capital market is totally unimaginable without a convertible currency.

He expressed his confidence in the coming of a common currency for Asia.

He believed the RMB was a currency of great potential, but inconvertibility was its biggest weakness. The Japanese yen was convertible, but very volatile. Neither held the potential of an Asian common currency.

Mundell suggested that Asian currencies be pegged to the US dollar in the first step, and as the mechanism for stable exchange rates took root, a common Asian currency would evolve.

The same as the establishment of euro depended on Germany and France, he believed, the establishment of the Asian common currency would depend largely on China and Japan.

Mundell spoke highly of China's efforts to maintain the stability of yuan and its refusal to devalue, saying that it would have a positive impact on China's economic development and had contributed greatly to the Asian economy.

The Nobel Economics laureate noticed that there were two engines in the past two decades for the world economy. One was the United States and the other China.

China had maintained a nine percent growth rate over the past two decades. The size of its economy had reached US$1.1 trillion. Its share of international trade rose from one percent to six percent, he said.

In view of the massive inflow of overseas capital in recent years, Mundell said he was optimistic that China would be able to sustain high economic growth in the next ten years.

(eastday.com May 21, 2002)