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Imf seeks balance in china currency policy debate Original Source Link: (May no longer be active)    http://www.forbes.com/markets/newswire/2004/02/25/rtr1274717.html http://www.forbes.com/markets/newswire/2004/02/25/rtr1274717.html IMF seeks balance in China currency policy debate Reuters, 02.25.04, 12:28 AM ET By Jonathan Standing TOKYO, Feb 25 (Reuters) - The head of the International Monetary Fund (IMF) sought balance in the debate over China's fixed currency policy on Wednesday, saying that while flexible exchange rates were desirable, so was mutual understanding. Ahead of a key visit by U.S. finance officials to China, IMF Managing Director Horst Koehler told reporters in Tokyo that sitting down and talking with China and gaining a proper understanding of differing views on currencies was necessary. "I do think that it is in the self-interest of China to move to more flexibility," Koehler said. "But I feel it is absolutely inappropriate to conduct this debate mainly via the press. I think there should be a dialogue and each side should listen to the other side and hopefully then we will come to a decision which complies with mutual interests." His remarks came as United States officials upped their rhetoric over China's policy of pegging the yuan currency at around 8.28 to the dollar, which some U.S. manufacturers and legislators blame for a mounting U.S. trade deficit. A U.S. Treasury delegation heads for China this week, and one of the purposes of the visit, Treasury Secretary John Snow noted on Tuesday, would be to "put them (China) in a position to move toward a float" of the yuan. Earlier this month, Snow told Congress that China was committed to changing its currency regime and pledged to "hold their feet to the fire" on the issue. China has resisted pressure to revalue the yuan , citing concerns over the stability of the fast-growing domestic economy, but has pledged to make the rigid currency more flexible in time. On Tuesday, the central bank reaffirmed its long-held position in an annual monetary policy report. "The yuan's formation mechanism will be perfected and the exchange rate will be kept basically stable at a rational and balanced level," the bank said. Koehler declined to speculate on when China should consider any changes to its exchange rate system. But in a veiled reference to the U.S. visit, he warned against pressing for short-term solutions. "My advice was and is to have a frank dialogue with Chinese officials, trust them that they can listen to the arguments why flexibility in the end is the right way to go," he said. "And we also need to listen to them, because they also have questions and points they have to consider. This is not a type of quick fix coming from the managing director of the IMF or any kind of delegation." He also noted that the international community should remember that China was a cooperative partner during the Asian crisis in 1997 and 1998. Copyright 2004, Reuters News Service

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