IMF says China’s yuan no longer undervalued
Says Beijing should work toward a floating exchange rate in two to three years.
BEIJING — The International Monetary Fund no longer believes China’s tightly controlled currency is undervalued, an IMF official said, a stance that might help Beijing in its wrangling with Washington over exchange rate controls.
The IMF’s first deputy managing director, David Lipton, also said Beijing should work toward having a floating exchange rate in two to three years.
The US has long accused of China of suppressing the value of its yuan, giving its exporters an unfair price advantage and hurting foreign competitors. The IMF had considered the yuan undervalued – a source of tension between the fund and Beijing.
Lipton said that after recent changes in global exchange rates, “We believe that it is no longer undervalued.”
Lipton spoke after meeting with a Chinese vice-premier, Ma Kai; central bank Gov. Zhou Xiaochuan; the chairman of China’s securities regulator and other officials.
The Washington-based IMF has forecast Chinese economic growth this year at 6.8%, close to the ruling Communist Party’s target of 7%.
Growth has slowed steadily over the past three years as the party tries to reduce reliance on trade and investment by encouraging domestic consumption.
An unexpectedly sharp slowdown has prompted concern about a politically dangerous spike in job losses. Beijing has cut interest rates three times since November to prop up growth and told state-owned banks to lend to investment agencies run by local governments.
Lipton said that if growth appears likely to exceed 7 per cent, Beijing should take advantage of that to reduce financial risks by tightening controls on fast-growing credit. He said that if growth comes in under 6.5 per cent, the government should consider expanding spending.
“We urge the authorities to make rapid progress toward greater exchange rate flexibility,” Lipton said at a news conference. “We believe that China should aim to achieve an effectively floating exchange rate within two or three years.”