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IMF's Rato-China currency policy constrains all Asia

By Staff
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Google Oneindia News

WASHINGTON, July 27 (Reuters) If China let its yuan currency find its value more freely, other Asian nations' currencies could appreciate without fear of losing exports, International Monetary Fund chief Rodrigo de Rato said.

In a speech prepared for delivery on Saturday to a bankers' conference in Bangkok, Thailand, Rato suggested that China's managed currency was helping fuel potentially dangerous protectionist sentiments. The text was released in advance in Washington.

''Greater exchange rate flexibility is not only in China's best interest but would allow other Asian countries to appreciate with less concern about competitiveness,'' Rato said.

He noted that many Asian countries, which are linked to China, could suffer if restrictions are placed on Chinese imports.

There is a drive in the U.S. Congress to pass legislation that could impose penalties, including tariffs on Chinese imports that U.S. producers claim are unfairly cheaply priced, because the yuan is kept deliberately undervalued by Beijing.

''There is also the possibility of such protectionism spinning out of control with disastrous consequences for the global economy,'' Rato warned in an address to SEACEN, a research center set up by South East Asian central banks.

China manages the value of its yuan currency, also called the renmimbi, within a narrow range that the United States and many European countries maintain does not represent its fair value given China's rising global economic might.

Rato, who will leave the IMF this autumn, said that one of his goals was to help rapidly growing emerging-market economies gain a greater voice in global institutions that help set and enforce the rules for global trade and banking.

''Greater responsibilities of emerging-market economies, including many of the SEACEN countries, should be matched by greater influence in global economic decision-making, including in the Fund,'' Rato said.

Before the IMF and World Bank hold their semi-annual meetings in September, Rato said he expects to make progress on a ''simple and transparent'' formula for setting quotas that determine voting shares within the IMF.

Rato said that will give increased voting shares to dynamic economies, many of which are defined as emerging markets, and it must happen soon. ''I have said many times that this is an issue that is vital for the Fund's legitimacy,'' he said.

REUTERS PBB RS2035

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