China faces risks from inflation and a possible boom and bust in real-estate prices, and it should allow its tightly controlled currency to rise to promote economic stability, the IMF said yesterday.
In an annual review, the IMF recommended changes it said would raise China’s living standards and promote a transition to more sustainable growth with less reliance on exports and investment.
It said Beijing should allow interest rates to be set by the market and ease controls on investment flows into China.
China’s main domestic risks are higher inflation, a bubble in real-estate prices or a decline in credit quality because of the upsurge in lending as part of Beijing’s response to the global crisis, the report said.
A stronger yuan is “a key ingredient to accelerate the transformation of China’s economic growth model,” it said.
China’s inflation rose to a three-year high of 6.4 percent last month, driven by a 14.4 percent jump in food costs. A stronger yuan might help to cool prices by making oil, food and other imports cheaper in local currency terms.
The Washington-based IMF said the yuan is undervalued by 3 to 23 percent — depending on which method is used to measure the gap — and currency controls are holding back reforms that could make its state-dominated financial system more flexible and efficient.
The report could provide ammunition to critics in Washington and elsewhere who say an undervalued yuan gives China’s exporters an unfair advantage, swelling its trade surplus and hurting efforts to create jobs after the global crisis.
China’s central bank controls the yuan’s exchange rate by purchasing most of the US dollars and other foreign currency that flow into the country and then stockpiling them in US Treasury securities and other foreign -currency-denominated assets.
In April, the IMF cited Beijing’s currency controls as a possible factor that might hamper a global recovery. Some US lawmakers say they want punitive tariffs on Chinese goods if Beijing fails to ease its exchange rate controls.
China’s central bank and some other regulators have recommended easing controls on the yuan. However, they face opposition from factions that worry a stronger yuan could hurt exporters and cost jobs, possibly fueling unrest.
Beijing’s member of the IMF board disagreed with its conclusions on the currency and money flows.
In a statement attached to the report, He Jianxiong (何建雄) said the yuan has risen in value by 21 percent since mid-2005. He said Beijing’s US$3 trillion in foreign reserves have swelled because unusually low interest rates in the US and Europe sent capital flooding into developing economies.
‘TAIWAN-FRIENDLY’: The last time the Web site fact sheet removed the lines on the US not supporting Taiwanese independence was during the Biden administration in 2022 The US Department of State has removed a statement on its Web site that it does not support Taiwanese independence, among changes that the Taiwanese government praised yesterday as supporting Taiwan. The Taiwan-US relations fact sheet, produced by the department’s Bureau of East Asian and Pacific Affairs, previously stated that the US opposes “any unilateral changes to the status quo from either side; we do not support Taiwan independence; and we expect cross-strait differences to be resolved by peaceful means.” In the updated version published on Thursday, the line stating that the US does not support Taiwanese independence had been removed. The updated
‘CORRECT IDENTIFICATION’: Beginning in May, Taiwanese married to Japanese can register their home country as Taiwan in their spouse’s family record, ‘Nikkei Asia’ said The government yesterday thanked Japan for revising rules that would allow Taiwanese nationals married to Japanese citizens to list their home country as “Taiwan” in the official family record database. At present, Taiwanese have to select “China.” Minister of Foreign Affairs Lin Chia-lung (林佳龍) said the new rule, set to be implemented in May, would now “correctly” identify Taiwanese in Japan and help protect their rights, the Ministry of Foreign Affairs said in a statement. The statement was released after Nikkei Asia reported the new policy earlier yesterday. The name and nationality of a non-Japanese person marrying a Japanese national is added to the
AT RISK: The council reiterated that people should seriously consider the necessity of visiting China, after Beijing passed 22 guidelines to punish ‘die-hard’ separatists The Mainland Affairs Council (MAC) has since Jan. 1 last year received 65 petitions regarding Taiwanese who were interrogated or detained in China, MAC Minister Chiu Chui-cheng (邱垂正) said yesterday. Fifty-two either went missing or had their personal freedoms restricted, with some put in criminal detention, while 13 were interrogated and temporarily detained, he said in a radio interview. On June 21 last year, China announced 22 guidelines to punish “die-hard Taiwanese independence separatists,” allowing Chinese courts to try people in absentia. The guidelines are uncivilized and inhumane, allowing Beijing to seize assets and issue the death penalty, with no regard for potential
‘UNITED FRONT’ FRONTS: Barring contact with Huaqiao and Jinan universities is needed to stop China targeting Taiwanese students, the education minister said Taiwan has blacklisted two Chinese universities from conducting academic exchange programs in the nation after reports that the institutes are arms of Beijing’s United Front Work Department, Minister of Education Cheng Ying-yao (鄭英耀) said in an exclusive interview with the Chinese-language Liberty Times (the Taipei Times’ sister paper) published yesterday. China’s Huaqiao University in Xiamen and Quanzhou, as well as Jinan University in Guangzhou, which have 600 and 1,500 Taiwanese on their rolls respectively, are under direct control of the Chinese government’s political warfare branch, Cheng said, citing reports by national security officials. A comprehensive ban on Taiwanese institutions collaborating or
RSS