Dominique Strauss-Kahn, the head of the International Monetary Fund, on Friday reiterated his criticism of China??s ??undervalued? currency, but said reforms to exchange rate policies were part of wider moves to create more balanced global growth.Speaking at the opening of the World Bank and IMF annual meetings in Istanbul, Mr Strauss-Kahn and Robert Zoellick, the bank??s president, called for the world to continue co-operating on international economic issues even as the economic and financial crisis fades.
One area where there has not been a new mood of international co-operation has been in currencies where the US and Europe believe the renminbi needs to appreciate to help reduce China??s still large trade surplus. The Group of 20 brushed the issue under the carpet at the Pittsburgh summit last week.
In criticising China??s exchange rate again, Mr Strauss-Kahn showed the IMF would not stop what he called its ??ruthless truth telling? even if it made it unpopular. He said: ??The IMF view still is the renmimbi is undervalued.?
But he stressed that rigid currency policies were not the only reason for the rise in global trade imbalances. He said poorer countries?? desire to build huge reserves rather than turn to the IMF for lending was at the heart of the matter. They kept their exchange rates low to build exports and provide ready funds to deal with a crisis.
This build up of reserves, Mr Strauss-Kahn said, should be replaced in future by a ??less costly and more efficient pooling of reserves? at the IMF. He said the decision in principle to shift 5 per cent of the votes in the IMF from richer countries to poorer ones was ??key? to making the fund more credible and legitimate.
