Reuters WASHINGTON (Reuters) — The International Monetary Fund on Friday stood by its assessment that the value of China’s yuan was largely in line with economic fundamentals, but an IMF official said the fund was encouraging China to pursue a more flexible exchange rate with less intervention.
James Daniel, director of the IMF’s China department, said an assessment of China’s economic policies found the yuan exchange rate in 2018 to be “not significantly overvalued or undervalued.”
The IMF’s views on the yuan are at odds with those of its largest shareholder, the United States, which last week declared China a “currency manipulator” after it allowed the yuan to slip below 7 to the dollar to 11-year lows.
U.S. Treasury Secretary Steven Mnuchin is seeking to engage the IMF to help “correct” an unfair trade advantage from Beijing’s currency actions, but Daniel declined to say how the IMF was responding to the request.
“Our discussions with the U.S. Treasury are ongoing on a range of issues,” Daniel told reporters on a conference call, echoing an earlier statement from an IMF spokesperson.
The IMF said in the report that a worsening of trade tensions with the United States could put China’s economic and financial stability at risk, making new fiscal stimulus measures from the government warranted.
The IMF said if the United States were to impose 25 percent tariffs on a remaining $300 billion list of Chinese imports, this would reduce China’s growth by around 0.8 percentage points over the following 12 months, driven by a sharp fall in demand and a tightening of financial conditions. Negative global spillovers could be significant, it added.
Daniel said that a 10 percent tariff on this category of goods — as U.S. President Donald Trump intends to impose on Sept. 1 — could result in a 0.3 percentage point cut to growth.
Weighed down by weak demand at home and abroad, China’s growth slowed to 6.2 percent in the second quarter, a near 30-year low.