IMF head: renminbi is very undervalued

By Chrystia Freeland
October 6, 2010

The Chinese renminbi is “substantially undervalued,” IMF Managing Director Dominique Strauss-Kahn said at the Yalta European Strategy Annual Meeting. But, he added, too often that’s used as an excuse by rich countries to postpone structural reforms that would restore competitiveness:

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The question of a revaluation of the renminbi should not be used as a curtain behind which you’re hidden to avoid to do what you have to do in your own country.

Strauss-Kahn noted that even a one-off revaluation of the renminbi by 20% would not right the world’s imbalances. Recently, while China’s trade surplus has decreased, America’s trade deficit has not.

5 comments

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its not about perfecting the world balance. There will never be world balance just as there will never cease to be homelessness or the end of world peace.

The yuan is undervalued, simple, done, truth. So fix it. 1% change is better than no change.

‘Oh we can’t make it perfect so don’t do anything’ – great logic there. If that were true, the government would not be able to function.

Posted by BHOlied | Report as abusive

Finally somebody said truth – China uses currency manipulation to fix exports. But by now truth doesn’t really matter. We see the beginning of “Currencies Wars”. Instead of building unified front against China manipulations USA tried to arrange something in private and… failed. Couple days ago Japan CB cut rates to 0% unilaterally. Brazil imposed restriction on bond transactions. Soon ECB will act as well… unilaterally.

Posted by S_K_V | Report as abusive

What is the basis of Strauss-Kahn statement that the Chinese currency is substantially undervalued? Is it because China runs surpluses with both the US and Europe? But then, China runs deficits with Japan, South Korea and the ASEAN countries. Based on the logic of Strauss-Kahn, the currencies of Japan, South Korea and the ASEAN countries must be more substantially undervalued. Furthermore, if the undervaluation of the Chinese currency were the cause of the US deficit, then why did this deficit widen since 2005 despite the appreciation of the Chinese Yuan by more than 20%?
The fact is that Strauss-Kahn is merely acting as the mouthpiece of the US. This is very unfortunate when he was speaking as the head of the IMF.

Posted by Jeanmichel | Report as abusive

People are tired of the Chinese cheating like this. Who do they think they are. Time to tax them heavily or as an extreme stop dealing with them. The world demands an appreciation of the Yuan NOW and more than 1 or 2 % !

Posted by VARKER1 | Report as abusive

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[...] world and risk[ing] financial instability at home.” Being of the same opinion as Mr. Bernanke, Mr. Dominique Strauss-Kahn (IMF Managing Director) states, that the Chinese currency is substantially undervalued, but adds, [...]