IMF official says China's yuan no longer undervalued
The International Monetary Fund (IMF) no longer believes China's tightly controlled currency is undervalued, an IMF official said on Tuesday, 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 towards having a floating exchange rate in two to three years.
The United States has long accused 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 Governor 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 per cent, close to the ruling Communist Party's target of 7.0 per cent.
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 seven 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 towards 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."