China opposes new IMF ruling on exchange rate policy

Beijing, June 21 (PTI): 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 as well as that of other developing nations.

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

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.

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

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 Chinese central bank 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," it added.

China is under pressure from its major trading partners to revalue its currency. American manufactures contend that the yuan is undervalued by as much as 40 per cent.