June 19, 2010IMF's Lipsky Says China's Yuan Decision Is `Small Part' of Moves Needed
China’s decision to allow a more flexible yuan is a “small” step as the Chinese currency remains “substantially” undervalued, the International Monetary Fund’s No.2 official said.
“It gives the sense that they are intending to reinstate the policies that they were following before the crisis,” IMF First Deputy Director John Lipsky said in a Bloomberg Television interview in St. Petersburg today. “It’s just one small part of the needed moves.”
China today said it will allow a more flexible yuan, signaling an end to the currency’s 23-month-old peg to the dollar a week before a Group of 20 summit. The decision to “increase the renminbi’s exchange-rate flexibility” was made because the economy has improved, the central bank said. It added that there is no basis for “large-scale appreciation.” The yuan’s 0.5 percent daily trading band will remain unaltered.
“It would be a mistake to view a single policy move, even one that’s been as closely watched and broadly anticipated and hoped for as this, as representing a solution and remedy on itself,” Lipsky said.
It’s not clear how much the Chinese currency may appreciate, he said, adding that the decision will help develop domestic demand, rein in consumer-price growth in China and support commodity prices.
“We are convinced that this would be a very helpful contribution to the process of the global economic adjustment and reform,” he said.
http://preview.bloomberg.com/news/2010-06-19/imf-s-lipsky-says-china-s-yuan-decision-is-small-part-of-moves-needed.html
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