Thursday, November 5, 2015

Former IMF Desmond Lachman Says IMF is Giving Bad Advice to China

The IMF has indicated that China can expect to see the yuan included in the SDR currency basket and has praised China for taking steps it views as positive to open up its capital markets and liberalize the exchange rate for its currency. 

Not everyone agrees this is a good idea however. Former IMF Deputy Director Desmond Lachman says the IMF is giving China bad advice in this recent article in The Hill. Below are a couple of quotes from his article.

"In the context of China's bid for its currency to be included in the IMF's Special Drawing Right (SDR) basket, the International Monetary Fund (IMF) seems to be dispensing poor policy advice to China with respect to its exchange rate and external capital account management. By pushing the Chinese policymakers to further liberalize their country's exchange rate and to open up their capital account at this delicate juncture for both the Chinese and the global economies, the IMF risks not only heightening China's present economic difficulties, but also undermining the global economic outlook."

. . . . .

"For China's sake, as well as for that of the global economy, one has to hope that Chinese policymakers disregard the IMF's policy advice and drop their quest for inclusion of their currency in the SDR basket at any cost. The last thing that either China or the world economy needs right now is instability in the Chinese currency market that could have serious adverse consequences well beyond China's borders."

note:   Desmond Lachman is a resident fellow at the American Enterprise Institute. He was formerly a deputy director in the International Monetary Fund's Policy Development and Review Department and the chief emerging market economic strategist at Salomon Smith Barney.

Addition added note: There seems to be some confusion as to what date the IMF has set in November to announce a decision on the yuan. Some reports say the date was moved back from November 4th to November 30th while others say no exact date has been set.

No comments:

Post a Comment