Call for yuan to become more freely convertible

14:13, June 10, 2011      

Email | Print | Subscribe | Comments | Forum 

The yuan needs to be more freely convertible and widely used in global trade in order to be included in the special drawing rights (SDR) basket of the International Monetary Fund (IMF), John Lipsky, acting managing director of the IMF, said on Thursday.

"It is agreed that the renminbi is likely to become a candidate for inclusion in the SDR basket," Lipsky said at a news briefing in Beijing. "But it needs to become more freely and widely used in international transactions."

Lipsky called for a stronger yuan to tilt the Chinese economy toward domestic consumption and help stabilize the global economy. He said China needs to further liberalize its financial system to eventually move toward an open capital account with the yuan as a fully convertible currency.

In its latest assessment of China's economy, the IMF expects China to continue to be a "bright spot" for global growth, although the country still confronts the near-term risks of the recent credit expansion and off-balance sheet exposures.

The People's Bank of China (PBOC) has urged customers to pay attention to the risk of loans made through local government financing vehicles. Chinese banks may be saddled with a large amount of bad loans after the borrowing spree of local governments following the financial crisis in 2008.

Nigel Chalk, the IMF's mission chief to China, said the Chinese government fully recognizes the risks associated with local government debt and the measures it has adopted to manage those risks are sufficient to handle the problem.

For China's monetary policy, Chalk said that the PBOC is likely to adopt more balanced monetary tools, including more reliance on interest rates and the exchange rate, and less reliance on reserve requirement ratios and other administrative controls on bank lending.

The IMF forecast that China's economy will grow at 9.5 percent this year and next and inflation will slow to around 4 percent by the end of the year.

China's economic data for May is due to be released on Tuesday. It has been speculated by some economists that the consumer price index (CPI), a main gauge of inflation, is likely to hit a 34-month high of 5.5 percent in May because of the severe droughts in southern provinces that pushed up the price of agricultural products.

Lipsky noted that uncertainties about higher global commodity prices and weather-related shocks to food prices will remain, although many of the key drivers of inflation will soon start to dissipate.

Lispsky said the country is still faced with the risk of rapid rises in property prices, driven by high savings, cheap financing and the lack of alternative investment instruments.

Source:China Daily
Wen Jiabao attends trilateral leaders' meeting of China,Japan and ROK
The Third China-U.S.Strategic and Economic Dialogue
  Weekly review  
May 20   World Economic Forum China office marks fifth anniversary
May 18   China, Pakistan joined in bonds of brotherhood
May 20   'Central axis' of Beijing applies for world cultural heritage
May 20   In pictures: Int'l 'Financial Security' symposium opens in Beijing
May 21   The week in pictures
May 16   Beijing aims for massive influx of overseas talent in 2011
May 16   Singapore election coverage shows Western arrogance
May 16   Chinese naval helicopter conducts target practice in Gulf of Aden
May 17   Strategies for harmony between militaries of China, US
May 17   Pakistani Prime Minister hails China as true friend


  • Do you have anything to say?


Special Coverage
  • China battles droughts
  • Wen Jiabao attends trilateral leaders' meeting of China, Japan and ROK
Major headlines
Editor's Pick
  • Fish fries put into Yangtze River for economic purposes, natural reservation
  • People hold mass funeral in Cairo for dead in protests
  • Jordanian King issues general amnesty to release prisoners
  • New round of rainfall to pour in drought-stricken areas
  • At least 2 killed in roadside bomb attack in SW Pakistan
  • Dallas Mavericks beat Miami Heat in Game 5 at 2011 NBA finals
Hot Forum Discussion