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China cites forex reform progress

China's foreign exchange reforms have made "significant progress," though the impact will be seen over time, Beijing's central bank governor told fellow financial leaders yesterday.

The remarks by the governor of the People's Bank of China, Zhou Xiaochuan (周小川), came amid calls from other delegates to the annual meeting of the IMF and World Bank for more action to ensure flexibility in currency rates.

"Significant progress has been made to improve the exchange regime to allow greater flexibility," Zhou said of China's controls on its currency, the yuan, which Beijing says are needed to protect its developing economy.

"The impact of these policies will be felt over time," he said.

Critics of China's currency policies say they keep the yuan artificially undervalued, making China's exports cheaper overseas and boosting its exports.

A US official meanwhile urged the fund, which seeks to promote financial stability and provides loans to countries in crisis, to step up its oversight of currency issues.

"The encouragement of appropriate exchange rate policies to facilitate international trade and global growth remain the IMF's most fundamental responsibilities," US Treasury Assistant Secretary for International Affairs Clay Lowery said.

"This entails rigorous assessments of members' exchange-rate regimes," Lowery said, warning that ceding that role would result in countries taking action independently, "frankly to the detriment of us all."

IMF President Rodrigo de Rato acknowledged the calls for more surveillance over currency issues.

"The responsibility of the IMF is very clear. We are, we have a mandate to macroeconomic and financial stability," de Rato said, adding that "exchange rates form part of that mandate."

But such discussions are not done in public, he said.

"At the same time, as it is known, the discussion of exchange rate equilibrium positions is held in a discreet way because it is very sensitive information sometimes," he said.
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