China Right to Show Caution with Exchange Rate: IMF

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Last updated at: (Beijing Time) Wednesday, September 03, 2003

China Right to Show Caution with Exchange Rate: IMF

International Monetary Fund (IMF) managing director Horst Kohler said Tuesday in Beijing that he agreed with China's caution on the issue of adjusting the international exchange rate of China's currency, the Renminbi (RMB).

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International Monetary Fund (IMF) managing director Horst Kohler said Tuesday that he agreed with China's caution on the issue of adjusting the international exchange rate of China's currency, the Renminbi (RMB).

The IMF chief also urged the international community to remember the contribution that China's exchange rate policy made to the regional and world economy during the Asian financial crisis.

Kohler told Xinhua that he believed China would continue to contribute to regional and international economic development as it did in the 1997 crisis, when many neighboring countries devalued currencies, but China strived to maintain a strong RMB and contributed to the economic stability in Asia and the world.

"I think it is right that China's leadership weight carefully the benefits and costs of greater flexibility in the exchange rate", said Kohler, who was on his fourth visit to China.

The IMF agreed with China's view that establishing a free-floated exchange rate was a long-term goal, said Kohler, adding that China should move gradually and moderately increase the flexibility of the exchange rate.

IMF Chief Confident of China's Economic Growth

China is capable of sustaining an economic growth rate of up to 10 percent a year without overheating, Horst Kohler, managing director of the International Monetary Fund (IMF), said Tuesday.

Kohler said he was happy to see China's economy had offset the negative impact of severe acute respiratory syndrome (SARS) and maintained a strong economic growth momentum.

He predicted that China's economy could achieve an eight to ten percent growth rate in a quite long period of time.

"I don't think, generally, that China's economy is overheated, and a growth rate of eight to ten percent is possible and can be sustained over many years," Kohler said.

Kohler regarded the government's plans for economic reform as "well thought through".

He believed the establishment of the China Banking Regulatory Commission and creation of the State Assets Supervision and Administration Commission would play a positive role in economic reform, especially in the sectors of state-owned enterprises and public finance.

Kohler said Chinese leaders had demonstrated determination to take further measures to decrease unemployment, accelerate the processing of the non-performing loans, and raise the income of Chinese farmers.

"I have confidence that China would make its way forward," Kohler said.

However, the IMF chief warned that over-investment in China's housing property sector and the rapid growth of bank credit in the macro-financial operation warranted serious attention.

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