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BIZCHINA / RMB Revaluation

China opposes IMF rule on exchange rate

By Hong Guan (China Daily)
Updated: 2007-06-21 08:48

China has expressed "reservations" about a new International Monetary
Fund (IMF) ruling on exchange rate policy, saying drastic exchange rate
fluctuations in a country will damage its economic stability.

The IMF's Executive Board decided on Friday on a new framework for IMF
bilateral surveillance, or the way the Fund monitors and assesses its
member's economies.

It is an update of the 1977 Decision on Surveillance over Exchange Rate
Policies. The revised decision adds the new principle that a member
should avoid exchange rate policies that result in external instability.

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The ruling has been widely interpreted as a move to increase pressure on
China to allow a faster revaluation of the yuan.

"As it does not fully reflect the opinions of developing countries, China
has expressed reservations about the adoption of this decision," said a
statement of the People's Bank of China.

Past experience has shown that exchange rate adjustment has a role in
resolving external imbalances, but it is not the fundamental and only
instrument to that end, the statement said.

"In the past years, many developing countries, China included, have
worked hard to adjust their domestic economic structure, improve market
mechanisms and increase exchange rate flexibility. These efforts have
contributed to the rapid growth of the global economy."

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