Greenspan: Challenging "conventional wisdom"

US manufacturers have long argued the yuan is undervalued, giving firms exporting to the US a huge advantage.

But Mr Greenspan said any fall in Chinese imports to the US would lead to more imports from elsewhere in Asia.

However, he did warn that China's economy risked overheating if the yuan was misaligned.

Complex story

In a speech, Mr Greenspan challenged the idea that China's pegging of its currency against the dollar was harming US jobs.

"The story on trade and jobs, in my judgment, is a bit more complex, especially with respect to China, than this strain of conventional wisdom would lead one to believe," he said.

"A rise in the value of the renminbi (yuan) would be unlikely to have much, if any, effect on aggregate employment in the United States," he added.

But he noted that if the value of the yuan was too far out of kilter, there could be some impact on the US.

"A misaligned Chinese currency, if that is indeed the case, could have adverse effects on the global financial market and, hence, indirectly on US output and jobs."

Mr Greenspan said that even if China's currency did rise against the dollar, any reduction in imports from China was likely to be offset by higher imports from other Asian countries.

He said the loss of US jobs was due to a poor export performance, rather than imports of cheap goods.

Political pressure

China has fixed the yuan at about 8.28 to the dollar since 1994, with only limited fluctuations allowed.

The country has indicated it will look into the revaluation of the yuan, but has ruled out any rapid shifts.

Earlier this year, US Treasury Secretary John Snow expressed the US Government's concern that the yuan may be dangerously undervalued.

US manufacturers have argued the yuan could be undervalued by as much as 40%.

Last year, the US trade deficit with China was $103bn and it is estimated to be more than $120bn this year.