IMF chief puts China under new currency pressure
The International Monetary Fund said on Friday a stronger yuan would boost China's economy but the Asian power showed no sign of heeding a growing clamour to budge on its rigid exchange rate.business Updated: Nov 13, 2009 23:19 IST
The International Monetary Fund said on Friday a stronger yuan would boost China's economy but the Asian power showed no sign of heeding a growing clamour to budge on its rigid exchange rate.
Speaking at annual meetings of the Asia-Pacific Economic Cooperation (APEC) forum, IMF chief Dominique Strauss-Kahn said most Asian currencies were undervalued and advised governments against "resisting" currency reforms.
"A revaluation of the currency in China, for instance, will have the result of an increase in household income," he told reporters ahead of a weekend summit being attended by Chinese President Hu Jintao.
US President Barack Obama is also due at the Singapore summit, and other Asian countries reeling from the dollar's plunge have been joining Washington's demands for China to let the yuan appreciate.
The dollar's long decline is bad news for export-reliant Asian countries that are struggling to maintain competitiveness, particularly against Chinese rivals benefiting from the yuan's government-enforced stability.
Following the criticism, Hu sought to play up the global benefits of his government's economic stimulus measures in a speech to an APEC business forum Friday.
China's 585-billion-dollar spending package and other policies have helped "the international effort to alleviate the impact of the financial crisis and restore world economic growth", Hu said.
"China will further boost domestic demand, vigorously expand the domestic market, and promote balanced growth of domestic and external demand," he said, adding the world economy still faces "uncertainties and destabilising factors".
Echoing US Treasury Secretary Timothy Geithner, Strauss-Kahn commended the Chinese government's handling of the economic crisis.
Its stimulus package and an emphasis on domestic consumption were "the right way to go", he said.
"Certainly as a result of all this rebalancing of the Chinese economy, one of the results will be a pressure upwards on the value of the currency," he said.
In advance of the summit, APEC finance ministers Thursday called for greater exchange rate flexibility, in what is widely seen as code for China to allow the yuan to strengthen against the dollar.
In a joint statement, they said APEC members should follow "monetary policies consistent with price stability in the context of market-oriented exchange rates that reflect underlying economic fundamentals".
Hu's speech made no clear mention of the yuan controversy.
"We should promote economic structural reform with a focus on regulatory reform in a voluntary, flexible and pragmatic fashion," he said, without elaborating.
China's central bank said in a quarterly report Wednesday that its exchange rate policy would begin taking into account "changes in international capital flows and the trends of major currencies". It also did not elaborate.
But China's central bank vice governor Yi Gang said on the sidelines of the APEC meeting that the government's yuan policy had not changed, Dow Jones Newswires reported.