Business | Economy
IMF delays China report fearing more market turmoil
The International Monetary Fund (IMF) has delayed holding discussions about a report on China's economy and its currency to avoid adding to upheaval in global markets, said the head of the IMF.
- Reuters
- Published: 00:07 October 2, 2008
Washington: The International Monetary Fund (IMF) has delayed holding discussions about a report on China's economy and its currency to avoid adding to upheaval in global markets, said the head of the IMF.
Global growth is expected to weaken in the face of the world wide credit crisis. Analysts say China's growth will also soften this year, but remain close to 10 per cent so providing welcome support to a struggling global economy.
"We have delayed [the report] just because it was obvious that there was no need to risk further problems in the current situation," IMF Managing Dir-ector Dominique Strauss-Kahn said in an interview on Tuesday.
"China's imbalance is a long-term problem and can wait one month more; it will not change the face of the world if we wait one more month," he added.
Strained ties
Ties between the IMF and China have been strained since the fund introduced new currency surveillance rules last year that make it easier for it to determine whether a country is keeping its exchange rate fundamentally misaligned to boost exports.
Beijing objected to the rules, regarding it as a ploy by the United States to enlist the fund in its campaign to force China's currency to rise at a faster pace.
Strauss-Kahn described the yuan in June is "substantially undervalued". China has been under constant pressure from western lawmakers to allow its closely managed currency to rise at a faster pace to address the country's large trade surplus.
The IMF dispute with China has delayed the report on IMF economic consultations with China since 2007. Beijing has not cooperated fully in the compilation of the report, arguing it is not being treated even handedly by the fund.
Recently the IMF also launched a so-called ad hoc consultation process, whereby it could enter into talks with countries to convince them to change course if their policies cause problems for other nations.
It was widely expected that the report could prompt such a consultation between the IMF and Beijing over China's foreign exchange policy.
But as the IMF board of member countries has prepared to discuss a combined 2007 and 2008 report on China, concern has grown that any of its content, especially if it involves strong language on the currency, could exacerbate market volatility.
Financial markets are already uneasy that China's economy is slowing down under the impact of weaker demand for China's exports and tight international credit markets.
Strauss-Kahn said since the ad hoc consultation process was only recently defined, it was unlikely to be implemented soon given the financial turmoil.
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