The IMF on Friday shifted its view on China’s currency, saying progress toward a more consumer-driven economy had made the yuan now only “moderately undervalued.”
Previously, the IMF said the yuan was “significantly undervalued,” joining the US, the EU and others in protest over the Chinese government’s policy keeping the yuan undervalued to make exports cheaper, gaining a trade advantage.
In a news conference in Beijing, the IMF’s first deputy managing director, David Lipton, said that over the past several years China had made “significant progress” in reducing external imbalances with other parts of the world.
Lipton cited improvement in China’s current account surplus, which shrank to less than 3 percent of GDP, or economic output, last year from 10 percent of GDP in 2007.
“The real trade-weighted value of the renminbi has appreciated,” he said, referring to the official name of the Chinese currency, according to his prepared remarks on the IMF Web site. “We now assess the renminbi (RMB) to be moderately undervalued against a broad basket of currencies.”
Lipton was in Beijing as part of the annual IMF health check-up of the world’s second-largest economy and for policy discussions with Chinese officials.
He met with Chinese Vice Premier Wang Qishan (王岐山) and held in-depth discussions with People’s Bank of China Governor Zhou Xiaochuan (周小川), Finance Minister Xie Xuren (謝旭人) and other senior Chinese officials.
A few weeks ago, US President Barack Obama’s administration rejected calls from US Congress to brand China a currency manipulator, but said its “significantly undervalued” currency was a key brake on global growth
“The available evidence suggest the RMB remains significantly undervalued, and we believe further appreciation of the RMB against the [US] dollar and other major currencies is warranted,” the US Treasury said on May 25.
The Treasury explained it declined to brand China a currency manipulator in part because of the yuan’s appreciation against the US dollar since June 2010 and a decline in its massive current account surplus, a broad measure of trade.
It also cited China’s commitments in the G20 and the US “to move more rapidly to a more market-determined exchange rate system.”
However, some critics in Washington have pointed to the reversal in recent weeks of the yuan’s two-year rise against the US dollar.
Since the beginning of last month, in nominal terms, the yuan has lost 1.4 percent against the greenback.