IMF Managing Director Dominique Strauss-Kahn on Saturday denied any link between the quota reform of the fund and currency issue in emerging market.
The dilemma that officials face is that the impact of a fall in exports as a result of RMB appreciation will be felt acutely and immediately, whereas the large welfare losses due to the evaporation of the value of China’s foreign-exchange reserves will be borne by society as a whole – but not immediately.
Zhou Xiaochuan rejected a “shock therapy,” arguing that any sharp appreciation of the yuan would create a wave of bankruptcy and social upheaval in China.
The world economy would face key challenges including the sovereign debt, jobless recovery, financial sector reform and global cooperation.
The instability of the yuan will cause disasters not only to China, but also to the world.
China is committed to moving toward a flexible exchange rate regime but there won’t be sharp yuan appreciation.
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