IMF urges more exchange rate flexibility in China, Asia

IMF urges more exchange rate flexibility in China, Asia

Deutsche Presse-Agentur, Singapore

A more flexible exchange rate regime in China would prompt other
Asian countries to follow, an International Monetary Fund (IMF)
official said as the World Economic Forum's East Asia summit
swung into its second day on Monday.

Deputy managing director Shigemitsu Sugisaki noted external
imbalances - which include the US$500 billion-plus U.S. current
account deficit, and large counterpart surpluses in Japan, China
and other Asian countries - are a "major concern" for the global
economy.

They are "unsustainable", he stressed.

More than 800 business and political figures from 32 countries
are attending the three-day annual summit held this year in
Singapore.

Greater currency flexibility in Asia is part of the solution
to the problem of widening global external imbalances, Sugisaki
said.

The administration of U.S. President George W. Bush has been
pressing for China in particular to revalue the exchange rate of
the Chinese currency, which has been fixed to the U.S. dollar
since 1994.

Japan has also been complaining of a flood of cheap imports
from China and has called on Beijing to revalue its currency, the
yuan.

China's adoption of a more flexible exchange rate would
encourage other countries in the region to move in the same
direction.

India, Indonesia, South Korea, Singapore and Thailand are
among the Asian countries which permit some exchange rate
flexibility, while Malaysia, Hong Kong and China fix their
currencies to the U.S. dollar.

The IMF recommends a "phased approach to flexibility" which
would not pose a major risk to China's economy," Sugisaki said.

Advanced countries must also tackle their structural problems,
he said, citing the need for labor and product market
deregulation in Europe, corporate and financial reforms in Japan
and a "credible medium-term fiscal framework" in the U.S.