Saturday, November 14, 2009
SINGAPORE (AFP) - – The International Monetary Fund said Friday a stronger yuan would boost China's economy, but the Asian power showed no sign of heeding a growing clamour to budge on its rigid exchange rate.
Speaking at annual meetings of the Asia-Pacific Economic Cooperation (APEC) forum, IMF chief Dominique Strauss-Kahn said most Asian currencies were undervalued and advised governments against "resisting" currency reforms.
"A revaluation of the currency in China, for instance, will have the result of an increase in household income," he told reporters ahead of a weekend summit being attended by Chinese President Hu Jintao.
In a speech later, Strauss-Kahn said that exchange rate reform was critical to a "rebalancing" of the global economy, which would see Asia reduce its dependence on exports and shift towards domestic demand.
"For the world to succeed in its rebalancing efforts, exchange rates must be allowed to reflect medium-run fundamentals," he said.
US President Barack Obama is also due at the Singapore summit, and other Asian countries reeling from the dollar's plunge have been joining Washington's demands for China to let the yuan appreciate.
The dollar's long decline is bad news for Asian exporters struggling to maintain competitiveness, particularly against Chinese rivals benefiting from the yuan's government-enforced stability.
Following the criticism, Hu sought to play up the global benefits of his government's economic stimulus measures in a speech to an APEC business forum.
China's 585-billion-dollar spending package and other policies have helped "the international effort to alleviate the impact of the financial crisis and restore world economic growth", Hu said.
"China will further boost domestic demand, vigorously expand the domestic market, and promote balanced growth of domestic and external demand," he said, adding the world economy still faces "uncertainties and destabilising factors".
Strauss-Kahn commended the Chinese government's handling of the economic crisis, echoing comments by US Treasury Secretary Timothy Geithner earlier this week.
Its stimulus package and an emphasis on domestic consumption were "the right way to go", the IMF chief said.
APEC finance ministers Thursday called for greater exchange rate flexibility, in what is widely seen as code for China to allow the yuan to strengthen against the dollar.
In a joint statement, they said APEC members should follow "monetary policies consistent with price stability in the context of market-oriented exchange rates that reflect underlying economic fundamentals".
Hu's speech made no clear mention of the yuan controversy.
China's central bank said in a quarterly report Wednesday that its exchange rate policy would begin taking into account "changes in international capital flows and the trends of major currencies". It did not elaborate.
But China's central bank vice governor Yi Gang said on the sidelines of the APEC meeting that the government's yuan policy had not changed, Dow Jones Newswires reported.
Hu made no mention of a brewing trade war with the United States ahead of talks with Obama in Beijing next week, but issued a call for all countries to resist protectionist measures.
The two sides have taken a series of retaliatory actions against each other over alleged unfair trade practices.
"Protectionism will not help any country move out of the crisis. It can only pose a threat to the fragile momentum of economic recovery," Hu said.
In a media briefing later, China's Commerce Minister Chen Deming made veiled criticisms of US trade measures.
"In the past 10 months of this year we have seen trade remedy investigations filed against China with an unprecedented frequency and scale," he said.
"Although the value of individual cases has been small, the aggregate value of cases affected by these protectionist measures is great. In particular these measures have bad and profound implications for freer international trade."
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