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Economy · Macro · Govt
IMF backs China’s handling its currency
2019/07/18 07:12:02
China’s monetary policy, IMF, Chinese yuan, China trade surplus

Jul 18, 2019 (China Knowledge) - In a new report released by the International Monetary Fund (IMF), the international organization found that in 2018, China's handling of the Chinese yuan was “broadly in line” with the state of its economy.

According to the IMF, China's external position, current account surplus and exchange rate have improved compared to previous years'assessment. IMF chief economist Gita Gopinath said that “After many years of excess current account surpluses, China's external position moved to become more broadly in line with fundamentals in 2018.”

The IMF pointed out that the yuan average real effective exchange rate, appreciated by around 1.4 % in 2019 and depreciated around 0.2% in the first five months of 2019, when measured against a basket of currencies. It is stated in the report that the country's real effective exchange rate was at the same level as warranted by fundamentals and desirable policies.

The IMF's stand is of stark contrast with Trump's, who have made repeated accusations that China engaged in currency manipulation in order to compete with U.S. The value of the yuan has always been a well contested issue between the two economies.

In the report, there was also no indication that China intervened in the foreign exchange market last year.  In 2018, the country's foreign exchange reserves recorded a modest decline of USD 67 bln, which was within normal range after adjusting for estimated valuation changes, returns on reserve assets and measurement margin of error.

The fund which consists of 189 countries working to foster global monetary cooperation, also highlighted the impact of the US-China trade war. The report mentioned how the dispute is weighing on global trade and investment, without materially affecting trade imbalances thus far.

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