China faces risks from inflation and a possible boom and bust in real-estate prices, and it should allow its tightly controlled currency to rise to promote economic stability, the IMF said yesterday.
In an annual review, the IMF recommended changes it said would raise China’s living standards and promote a transition to more sustainable growth with less reliance on exports and investment.
It said Beijing should allow interest rates to be set by the market and ease controls on investment flows into China.
China’s main domestic risks are higher inflation, a bubble in real-estate prices or a decline in credit quality because of the upsurge in lending as part of Beijing’s response to the global crisis, the report said.
A stronger yuan is “a key ingredient to accelerate the transformation of China’s economic growth model,” it said.
China’s inflation rose to a three-year high of 6.4 percent last month, driven by a 14.4 percent jump in food costs. A stronger yuan might help to cool prices by making oil, food and other imports cheaper in local currency terms.
The Washington-based IMF said the yuan is undervalued by 3 to 23 percent — depending on which method is used to measure the gap — and currency controls are holding back reforms that could make its state-dominated financial system more flexible and efficient.
The report could provide ammunition to critics in Washington and elsewhere who say an undervalued yuan gives China’s exporters an unfair advantage, swelling its trade surplus and hurting efforts to create jobs after the global crisis.
China’s central bank controls the yuan’s exchange rate by purchasing most of the US dollars and other foreign currency that flow into the country and then stockpiling them in US Treasury securities and other foreign -currency-denominated assets.
In April, the IMF cited Beijing’s currency controls as a possible factor that might hamper a global recovery. Some US lawmakers say they want punitive tariffs on Chinese goods if Beijing fails to ease its exchange rate controls.
China’s central bank and some other regulators have recommended easing controls on the yuan. However, they face opposition from factions that worry a stronger yuan could hurt exporters and cost jobs, possibly fueling unrest.
Beijing’s member of the IMF board disagreed with its conclusions on the currency and money flows.
In a statement attached to the report, He Jianxiong (何建雄) said the yuan has risen in value by 21 percent since mid-2005. He said Beijing’s US$3 trillion in foreign reserves have swelled because unusually low interest rates in the US and Europe sent capital flooding into developing economies.
TAIWAN IS TAIWAN: US Representative Tom Tiffany said the amendment was not controversial, as ‘Taiwan is not — nor has it ever been — part of Communist China’ The US House of Representatives on Friday passed an amendment banning the US Department of Defense from creating, buying or displaying any map that shows Taiwan as part of the People’s Republic of China (PRC). The “Honest Maps” amendment was approved in a voice vote on Friday as part of the Department of Defense Appropriations Act for the 2026 fiscal year. The amendment prohibits using any funds from the act to create, buy or display maps that show Taiwan, Kinmen, Matsu, Penghu, Wuciou (烏坵), Green Island (綠島) or Orchid Island (Lanyu, 蘭嶼) as part of the PRC. The act includes US$831.5 billion in
‘WORLD WAR III’: Republican Representative Marjorie Taylor Greene said the aid would inflame tensions, but her amendment was rejected 421 votes against six The US House of Representatives on Friday passed the Department of Defense Appropriations Act for fiscal 2026, which includes US$500 million for Taiwan. The bill, which totals US$831.5 billion in discretionary spending, passed in a 221-209 vote. According to the bill, the funds for Taiwan would be administered by the US Defense Security Cooperation Agency and would remain available through Sept. 30, 2027, for the Taiwan Security Cooperation Initiative. The legislation authorizes the US Secretary of Defense, with the agreement of the US Secretary of State, to use the funds to assist Taiwan in procuring defense articles and services, and military training. Republican Representative
Taiwan is hosting the International Linguistics Olympiad (IOL) for the first time, welcoming more than 400 young linguists from 43 nations to National Taiwan University (NTU). Deputy Minister of Education Chu Chun-chang (朱俊彰) said at the opening ceremony yesterday that language passes down knowledge and culture, and influences the way humankind thinks and understands the world. Taiwan is a multicultural and multilingual nation, with Mandarin Chinese, Taiwanese, Hakka, 16 indigenous languages and Taiwan Sign Language all used, Chu said. In addition, Taiwan promotes multilingual education, emphasizes the cultural significance of languages and supports the international mother language movement, he said. Taiwan has long participated
The paramount chief of a volcanic island in Vanuatu yesterday said that he was “very impressed” by a UN court’s declaration that countries must tackle climate change. Vanuatu spearheaded the legal case at the International Court of Justice in The Hague, Netherlands, which on Wednesday ruled that countries have a duty to protect against the threat of a warming planet. “I’m very impressed,” George Bumseng, the top chief of the Pacific archipelago’s island of Ambrym, told reporters in the capital, Port Vila. “We have been waiting for this decision for a long time because we have been victims of this climate change for
RSS