IMF keeping close watch on China’s exchange rate

Washington, November 22:

The International Monetary Fund (IMF) said yesterday it was keeping a close eye on China’s exchange rate, rebuffing US criticism that it has not been forceful enough on the currency issue. The IMF also said that China’s growth had been faster than expected since its last report on the booming Asian economy two months ago, and renewed concerns about excess investment. “As an institution, the IMF’s responsibility is surveillance over the exchange rate. We’ve done that and we continue to,” Steven Dunaway, the IMF’s mission chief for China, said. David Burton, director of the IMF’s Asia-Pacific department, said, “We have been working closely with the authorities on this issue for a long time, since as early as 1999.” The US treasury has criticised the IMF for not taking a tougher stand over China over the belief that the yuan’s exchange rate against the dollar is too low. That, according to foreign critics, has created an explosion in Chinese exports to the detriment of global economic stability.

Burton said the IMF welcomed a small revaluation of the yuan conducted in July, the first reform to China’s exchange rate regime in a decade. But the currency’s movement allowed by the Chinese authorities since then “has been quite limited.” Burton would not be drawn on how much the IMF thinks the yuan should rise. “But we do see scope now for greater flexibility and utilising more fully the flexibility in the existing system, which over time could allow the exchange rate to move quite significantly.

Plan to overtake

BEIJING: China will overtake Germany to become the world’s second largest trading country in 2008 if foreign trade maintains a 15 per cent annual growth rate, vice-minister of commerce Gao Hucheng said. In a speech at Beijing University on Monday, Gao predicted China would also likely replace the US as the world’s top trading country sometime between 2015 and 2020. Gao said China’s GDP will reach $1.8 trillion this year, ranking the economy sixth in the world. By the end of the year, China’s foreign exchange reserves will reach $800 billion. China’s total foreign trade is expected to top $1.4 trillion billion this year, up by 20 per cent from 2004, with exports growing by 26 per cent and imports around 18 per cent, Gai said. The OECD said in September that China’s economic growth rate had averaged 9.5 per cent over the past two decades and “seems likely to continue at that pace for some time.” — AFP