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China's currency 'no longer undervalued,' IMF says, clearing entry to SDRs
By Tom Mitchell and Shawn Donnan
Financial Times, London
Tuesday, May 26, 2015
The International Monetary Fund has declared that China's currency is "no longer undervalued," marking a significant shift after more than a decade of criticism of Beijing's tight management of the renminbi.
The move amounts to a major vote of confidence in Beijing and the renminbi at a critical time. It also puts the IMF at odds with its biggest shareholder, the United States, which insists that China continues to draw an unfair trade advantage from a renminbi that it considers "significantly undervalued." ...
The renminbi has gained 25 per cent against the US dollar since it was allowed to adjust upward within a narrow band a decade ago, and has held its value even as the dollar has strengthened against other major currencies over the past year.
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Speaking in Beijing at the end of a regular review of China's economy, David Lipton, the IMF's first deputy managing director, said: "While undervaluation of the renminbi was a major factor causing large imbalances in the past, our assessment is that the substantial real effective appreciation over the past year has brought the exchange rate to a level that is no longer undervalued." ...
Eswar Prasad, the former head of the IMF's China unit, said the shift by the fund was important as it marked the first time since the Asian financial crisis of the late 1990s that the fund had not deemed the renminbi to be undervalued. It also presaged the likely adoption later this year of the renminbi as one of the small number of major currencies in a basket used to determine the value of the IMF's de-facto currency, the Special Drawing Rights. ...
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