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US-China trade war
EconomyChina Economy

China could depreciate yuan further if trade war escalates, IMF says, rebuking currency manipulator charge

  • International Monetary Fund says the recent Chinese yuan weakening, which sparked currency war concerns, is in line with market ‘fundamentals’
  • IMF shuns thorny question over whether China is a ‘currency manipulator’ as alleged by US President Donald Trump in annual review

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The yuan has dropped about 4 per cent against the US dollar so far this month. Photo: AFP
Frank Tangin Beijing

The International Monetary Fund on Thursday found no fault with the recent weakening of the Chinese yuan, recommending that Beijing allow the currency to fall further if the trade war escalates, despite Washington branding China a “currency manipulator”.

The yuan, also known as renminbi, fell below a key level of seven to the US dollar earlier this month, leading the United States to allege that China is deliberately weakening the currency to gain trade advantages. China strongly hit back at the allegations, arguing that the yuan’s depreciation was a market move.
Zhang Longmei, deputy resident representative for the International Monetary Fund (IMF) in China, said at a briefing in Beijing that the yuan’s value “is assessed to be in line with fundamentals”, reiterating a conclusion made by the fund during its annual evaluation of the Chinese economy in July.

In making its assessment, the IMF examined the current accounts, foreign exchange reserves and exchange rate regimes of 30 economies, including the US and China, and published an annual report.

The yuan’s value has become a new battlefield between the world’s two largest economies, with US Treasury Steven Mnuchin telling Bloomberg News on Wednesday that he has contacted China’s central bank and the IMF over the issue. The Chinese currency weakened for 11 days straight against the US dollar to Thursday, the most prolonged slump on record.

At Thursday’s briefing, the IMF did not directly refer to the US’ decision to brand China a currency manipulator – a long-term accusation of US President Donald Trump – but said that China must increase “exchange rate flexibility” to deal with rising trade tensions and the uncertainty that brings.

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