China calls on IMF to lead int'l monetary reform
Reuters - 1 hour 19 minutes ago
* China wants IMF to stabilise major exchange rates
* No mention made of idea for new global reserve currency
* Emphasis on continuity of domestic policy
By Simon Rabinovitch
ISTANBUL, Oct 6 - The International Monetary Fund should start work on a reform agenda to fix "intrinsic defects" in the international monetary system, Chinese Finance Minister Xie Xuren said on Tuesday.
The IMF should aim to "provide a stable monetary environment for global growth and financial stability," Xie said in an address to the semiannual meeting of the IMF and World Bank.
He did not elaborate on what kind of reforms China envisaged, but his comments made clear that the world's fastest-growing major economy is dissatisfied with the status quo of volatile exchange rates beyond its borders and desires change.
Yi Gang, a central bank vice governor, said in a speech on Sunday that China wanted the IMF to closely monitor capital flows and "to promote relative stability of the exchange rates of major reserve currencies."
Left unsaid in China's formal statements at the meetings of finance officials in Istanbul was anything about the need for a new global reserve currency.
Earlier this year, Chinese central bank Governor Zhou Xiaochuan made waves when he suggested that the IMF's special drawing rights, its unit of account based on a basket of currencies, could eventually become a super-sovereign global reserve currency.
Having a single nation's currency at the heart of the international monetary system had made it very difficult to manage global liquidity, paving the way for recurring financial crises, Zhou said at the time.
Although Chinese leaders have since distanced themselves from the SDR proposal, their statements at the IMF meetings lend credence to the view that the world's third-largest economy is determined to push for reform -- potentially radical reform -- of the international monetary system.
CAUTION FIRST
But for the time being, China is in no rush to dethrone the dollar's position as the world's preeminent currency.
China stands to lose a lot from any decline in the dollar's value, as an estimated two-thirds of its $2.1 trillion stockpile of foreign exchange reserves, the world's largest, are invested in dollar-denominated assets.
Beijing's caution was captured in comments by the country's chief banking regulator on the sidelines of the IMF-World Bank meetings.
"It is far too early to say the Chinese currency could be an international reserve currency. I am always realistic, so let's face the reality," Liu Mingkang, chairman of the China Banking Regulatory Commission, said. "Countries with reserve currencies have got to be more responsible and we have got to be more supportive."
And while calling for major change in the international monetary system, China was insistent that its own controversial, tightly managed exchange rate regime was here to stay.
Central bank Vice Governor Yi told Reuters that China's yuan policy was very clear and would continue.
POLICY CONTINUITY
In his address at the IMF on Tuesday, Finance Minister Xie reiterated that China would maintain its "active fiscal policy and moderately loose monetary policy."
"We are seeing more positive signs and an upward trend in the Chinese economy," Xie said. "However, we are also soberly aware that the economic rebound is yet to be stable, firm or balanced."
Chinese officials have remained circumspect in their economic outlook, even as their country has led the world out of recession, fired up by a 4 trillion yuan government stimulus package and record lending by the country's mainly state-owned banks.
China's economy grew 7.9 percent year-on-year in the second quarter, and manufacturing surveys last week showed that momentum has remained strong.
Reuters - 1 hour 19 minutes ago
* China wants IMF to stabilise major exchange rates
* No mention made of idea for new global reserve currency
* Emphasis on continuity of domestic policy
By Simon Rabinovitch
ISTANBUL, Oct 6 - The International Monetary Fund should start work on a reform agenda to fix "intrinsic defects" in the international monetary system, Chinese Finance Minister Xie Xuren said on Tuesday.
The IMF should aim to "provide a stable monetary environment for global growth and financial stability," Xie said in an address to the semiannual meeting of the IMF and World Bank.
He did not elaborate on what kind of reforms China envisaged, but his comments made clear that the world's fastest-growing major economy is dissatisfied with the status quo of volatile exchange rates beyond its borders and desires change.
Yi Gang, a central bank vice governor, said in a speech on Sunday that China wanted the IMF to closely monitor capital flows and "to promote relative stability of the exchange rates of major reserve currencies."
Left unsaid in China's formal statements at the meetings of finance officials in Istanbul was anything about the need for a new global reserve currency.
Earlier this year, Chinese central bank Governor Zhou Xiaochuan made waves when he suggested that the IMF's special drawing rights, its unit of account based on a basket of currencies, could eventually become a super-sovereign global reserve currency.
Having a single nation's currency at the heart of the international monetary system had made it very difficult to manage global liquidity, paving the way for recurring financial crises, Zhou said at the time.
Although Chinese leaders have since distanced themselves from the SDR proposal, their statements at the IMF meetings lend credence to the view that the world's third-largest economy is determined to push for reform -- potentially radical reform -- of the international monetary system.
CAUTION FIRST
But for the time being, China is in no rush to dethrone the dollar's position as the world's preeminent currency.
China stands to lose a lot from any decline in the dollar's value, as an estimated two-thirds of its $2.1 trillion stockpile of foreign exchange reserves, the world's largest, are invested in dollar-denominated assets.
Beijing's caution was captured in comments by the country's chief banking regulator on the sidelines of the IMF-World Bank meetings.
"It is far too early to say the Chinese currency could be an international reserve currency. I am always realistic, so let's face the reality," Liu Mingkang, chairman of the China Banking Regulatory Commission, said. "Countries with reserve currencies have got to be more responsible and we have got to be more supportive."
And while calling for major change in the international monetary system, China was insistent that its own controversial, tightly managed exchange rate regime was here to stay.
Central bank Vice Governor Yi told Reuters that China's yuan policy was very clear and would continue.
POLICY CONTINUITY
In his address at the IMF on Tuesday, Finance Minister Xie reiterated that China would maintain its "active fiscal policy and moderately loose monetary policy."
"We are seeing more positive signs and an upward trend in the Chinese economy," Xie said. "However, we are also soberly aware that the economic rebound is yet to be stable, firm or balanced."
Chinese officials have remained circumspect in their economic outlook, even as their country has led the world out of recession, fired up by a 4 trillion yuan government stimulus package and record lending by the country's mainly state-owned banks.
China's economy grew 7.9 percent year-on-year in the second quarter, and manufacturing surveys last week showed that momentum has remained strong.