IMF talks showed no progress as USA, EU and Japan failed to convince China to sharply revaluate renminbi and move quickly towards more market-oriented exchange rate policies.
China expressed fears in moving rapidly towards revaluating its currency as it would lead to social and economic unrest. China’s top central banker Zhou Xiaochuan insisted on a progressive reform of Chinese currency revaluation instead of implementing a “shock therapy”.
US treasury secretary Tim Geithner said, “Excess reserve accumulation on a global scale is leading to serious distortions in the international monetary and financial system, and is inhibiting the international adjustment process”.
The US Treasury Secretary Timothy Geithner advised the International Monetary Fund to strengthen its surveillance of exchange rates policies and accumulation reserves.
Geithner also said the major emerging ecomies like China should be given more participation in running of the IMF only if they incorporate “more market oriented exchange rate policies that will reduce reliance on exports and strengthen domestic demand”.
Supporting US the European commissioner for economic and financial affairs, Olli Rehn said: “the Chinese authorities are encouraged to implement soon a more flexible exchange rate regime for the renminbi.”
Japan’s finance minister, Yoshihiko Noda, said: “It is not sustainable that certain countries achieve growth while imposing costs on other countries.”
Korn Chatikavanij, Thailand’s finance minister, observed: “The fact that there seems to be lack of agreement as to what needs to be done at the global level with the major economies is of concern to us. There seems to be a race to the bottom – US dollar, euro, renminbi – and that’s very problematic.”
Oxfam spokesman Mark Fried, said: “Thusands of people have flown in from all over the world for these meetings, and there’s been no movement on any issues of significance. There’s been a fight about currencies, and developing countries seem to have been forgotten: and hard decisions about reforming the way the IMF does business have been deferred.”
China’s deputy central bank governor, Yi Gang, said that China is committed to a more flexible exchange rate but developed countries like US also have to play its role to reduce global imbalance between surplus and deficit countries.
Strauss-Kahn announced that IMF would study the major five global economies the US, China, Japan, the euro zone and Britain collectively to develop its policy advice to alleviate global imbalances.
Strauss-Kahn also said that IMF will soon provide a deal to emerging ecomies to have more say in running the fund, however, increased power will also enhance the responsibility.
Considering US demand to strengthen IMF surveillance of exchange rates policies and accumulation reserves, and China’s insistence on a slow movement towards currency reforms, the IMF declared its priority to have “strong and even-handed surveillance to uncover vulnerabilities in large advanced countries.”
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