IMF won't prod the China on currency
THE International Monetary Fund (IMF) has chosen not to call the Chinese yuan "substantially" undervalued, in a move that recognises China's efforts to free up its exchange rate and avoids friction with an increasingly influential shareholder.
The summary of an annual review of China's policies yesterday omitted the contentious word, used by IMF Managing Director Dominique Strauss-Kahn as recently as June.
Several members of the IMF's 24-member executive board believed that the Chinese currency was too cheap.
But others said a structural reduction in the balance of payments surplus was already unfolding thanks to past steps to boost consumption, while others took issue with an assessment by IMF staff that the yuan was substantially undervalued.
On other issues, the board supported a gradual phase-out of China's massive fiscal stimulus in 2011, provided the current trajectory for the economy -- continued growth with benign inflation -- is maintained.