Statement by IMF Managing Director Dominique Strauss-Kahn on China’s Exchange Rate Regime

Statement by IMF Managing Director Dominique Strauss-Kahn on China’s Exchange Rate Regime
Press Release No. 10/251
June 19, 2010

Mr. Dominique Strauss-Kahn, Managing Director of the International Monetary Fund (IMF), issued the following statement today on China’s exchange rate regime:

"The People's Bank of China announcement to increase exchange rate flexibility and return to the managed floating exchange rate regime in place prior to the global financial crisis is a very welcomed development. A stronger renminbi is in line with findings of the G-20 Mutual Assessment Process, to be presented in Toronto next week, and will help increase Chinese household income and provide the incentives necessary to reorient investment toward industries that serve the Chinese consumer."

IMF Says China’s Yuan Decision Is Small Part of Moves Needed
June 19, 2010, 9:59 PM EDT

By Ryan Chilcote and Paul Abelsky

June 19 (Bloomberg) -- China’s decision to allow a more flexible yuan is a “small” step as the Chinese currency remains “substantially” undervalued, the International Monetary Fund’s No. 2 official said.<---ONE OF CHINAS EX-FINANCIAL LEADERS[b]

“It gives the sense that they are intending to reinstate the policies that they were following before the crisis,” IMF First Deputy Director John Lipsky said in a Bloomberg Television interview in St. Petersburg today. “It’s just one small part of the needed moves.”

China today said it will allow a more flexible yuan, signaling an end to the currency’s 23-month-old peg to the dollar a week before a Group of 20 summit. The decision to “increase the renminbi’s exchange-rate flexibility” was made because the economy has improved, the central bank said. It added that there is no basis for “large-scale appreciation.” The yuan’s 0.5 percent daily trading band will remain unaltered.

[b]“It would be a mistake to view a single policy move, even one that’s been as closely watched and broadly anticipated and hoped for as this, as representing a solution and remedy on itself,” Lipsky said.

It’s not clear how much the Chinese currency may appreciate, he said, adding that the decision will help develop domestic demand, rein in consumer-price growth in China and support commodity prices.

“We are convinced that this would be a very helpful contribution to the process of the global economic adjustment and reform,” he said.

--Editors: Alex Nicholson, James Amott.