Former US Federal Reserve chairman Ben Bernanke yesterday arrived Taipei to take part in a forum with prominent Taiwanese business and economic leaders.
He is the first former Fed chairperson to visit Taiwan after the end of their term.
Bernanke is on a multi-legged speaking trip to Asia that has already taken him to Shanghai and will see him join the two-day World Business Forum in Hong Kong next week.
Bernanke is scheduled to meet central bank Governor Perng Fai-nan (彭淮南) before attending today’s forum organized by the Chinese-language Business Weekly.
He is expected to exchange views on key economic issues at the forum with industrial leaders such as Taiwan Semiconductor Manufacturing Co (台積電) chairman Morris Chang (張忠謀), CTBC Bank Co (中國信託銀行) chairman Tung Chao-chin (童兆勤) and former National Development Council minister Kuan Chung-ming (管中閔), including the widening wealth gap and the impact of the US’ quantitative easing monetary policy on the world economy.
Earlier yesterday, Bernanke spoke at the Shanghai Forum, telling participants that China needs to create deep and liquid markets to avoid currency risks as it makes the yuan a convertible currency.
“China needs to avoid currency mismatch as it opens its capital account,” he said. “For a currency to be internationally traded, what you need most is liquid markets. A deep market means people can get their money out.”
China is in the final stages of opening up its capital account, giving global investors greater access to its stock and bond markets while making it easier for its citizens to put their money in offshore assets.
A freer flow of funds is needed for policymakers to achieve their goal of getting the yuan recognized as part of the Special Drawing Rights (SDR) basket of reserve currencies when the IMF conducts a review in October.
“When opening the capital account, you need to make sure the economy is strong enough to handle the fund flows out,” Bernanke said.
“An open account is a two-edged sword” and a drop in the currency could cause panic and an exodus of money, he said.
China’s desire to make the yuan an SDR currency is for “pride and image,” Bernanke said.
“If the yuan becomes an SDR currency it won’t have any effect on the average Chinese. It’s mainly symbolic,” he said.
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