China should not let yuan rise more in tackling inflation: professor.

TOKYO, May 22 Kyodo

China will face difficulties in tackling rising inflationary pressures if it lets the yuan appreciate further against other major currencies, as such a move would hurt exporters and increase the number of unemployed people, a Chinese professor said Thursday.

Zhu Qiren, professor at Peking University's China Center for Economic Research, said at a Tokyo seminar that as China has recently allowed the yuan to accelerate the pace of its gains against other currencies, it now faces a serious dilemma in steering its economic policies.

''When the U.S. dollar trades below 7 Chinese yuan, it causes a problem. Pressure will mount on the export sector,'' Zhu said.

The yuan has advanced against the U.S. dollar to record-high levels over the past few days since it moved off the dollar peg in July 2005. On Thursday, the dollar changed hands at around 6.94 yuan.

China's consumer price index rose 8.5 percent in April due mainly to spikes in food prices, according to the country's National Bureau of Statistics.

Zhu said China will need to reduce its heavy dependence on exports and boost domestic demand to tackle the problem. Chinese companies will also be encouraged to set up operations overseas, he pointed out.