Chinas policy of only gradually appreciating its
currency is unlikely to be shifted by the global market
volatility triggered by the Greek debt crisis, a senior IMF
official has said.
Naoyuki Shinohara, deputy managing director of the IMF, told
Emerging Markets: The recent crisis in Greece is
exceptional, and I dont see any direct linkages between
European sovereign debt burdens and the [decision to
strengthen] the renminbi.
He reiterated calls for the Asian giant to help correct
global imbalances by strengthening its undervalued
In recent weeks, markets have expected an increase in the
value of Chinas currency and changes to the exchange rate
regime, such as a one-off renminbi revaluation or a widening of
the daily trading band.
Both moves would break the 22-month currency peg to the
dollar and are expected before the US-China Strategic Economic
Dialogue on May 24-25.
The Greek debt scare that preceded the $120 billion bail-out
deal at the weekend sparked rumours that China would delay the
move but Shinohara said Chinas economy could ride
out global market storm.
This view was echoed by Li Daokui, a member of the
Peoples Bank of China (PBoC) monetary policy committee,
who told Emerging Markets that the need to boost
domestic consumption deserves more attention than international
Li said that 5% currency appreciation as
expected by some market players would be
excessive, disrupting exports from small and
medium-sized Chinese companies and abruptly increasing
the cost for [domestic firms] by piling on labour and
China is locked in a tug-of-war between those calling for
stable monetary and exchange rate policies and pressure to
rebalance the economy away from exports and adopt market-based
reforms, principally in currency and capital account
Asked if China could achieve its stated bid to make Shanghai
a global financial centre by 2020, Shinohara of the IMF said
that this would entail liberalization of domestic markets
and capital account transactions, and [at present] this is
being done very slowly. They need to increase the pace of
Shinohara also poured cold water on reports that China is
pushing for its currency to be added by 2015 to the basket of
currencies that comprise the IMFs special drawing rights
I see no particular push from the Chinese on
this issue and for any currency to be included, it needs to be
defined as currency that is traded in the global
Xie Xuren, the Chinese finance minister, in Tashkent
yesterday repeated the governments policy that
maintaining a stable exchange rate has contributed to
global financial stability.
Vice finance minister Li Yong, giving a briefing in Tashkent
yesterday, sidestepped the issue of whether China might raise
interest rates in addition to tightening banking reserve
requirements. He said that Beijing will consider every
instrument to fine tune demand.
Loan growth in China soared by an amount equal to 30% of GDP
last year, putting upward pressure on asset prices
such as real estate and stocks, Li acknowledged.