China calls for currency fairness

Deals

China has called into question international efforts to tackle currency manipulation by saying poorer countries must be treated fairly.

It spoke out after the International Monetary Fund (IMF) disclosed plans to focus on foreign exchange strategies threatening global financial stability. Experts interpreted the move as a response to US concerns that China has kept its currency artificially low. China's central bank said the new approach must be "even-handed".

Reservations
The US government has been pressing its Chinese counterpart to allow the yuan to trade more freely, arguing that its value against the dollar unfairly benefits Chinese exporters. Many US politicians have demanded action on the issue, saying the yuan's value has fuelled the huge US trade deficit and is distorting global capital flows. But Beijing has reacted coolly to the new measures - the first changes in the IMF's oversight policy in 30 years - questioning how appropriate they are for developing countries.

It said the IMF should take into account China's recent efforts to make the yuan more flexible and attempts to reform its own economy. In a statement, China's central bank said adjusting exchange rates was not the "ultimate and only instrument" for tackling trade imbalances. "China has expressed reservations about the adoption of this decision as it does not fully reflect the developing countries' opinions," it said.

"Large and disorderly exchange rate adjustments will not only exacerbate external instability, but also affect the sustainability of a country's domestic economic growth." US Treasury Secretary Henry Paulson is set to be questioned on the issue when he appears before Congressional leaders on Wednesday. (news.bbc.co.uk)

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