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Nov. 16 – A stronger Chinese currency needs to be part of the reforms that Beijing needs to make in order to increase domestic consumption and help ease global imbalances, International Monetary Fund managing director Dominique Strauss-Kahn has said on Monday according to The Economic Times.
Stating that countries at the heart of global imbalances needed to take various measures to ease them, he suggested that in the case of China, that means an increasing emphasis on domestic demand, especially private consumption, Strauss-Kahn said in remarks prepared for a financial conference in Beijing.
“A stronger currency is part of the package of necessary reforms,” he said. “Allowing the RMB and other Asian currencies to rise would help increase the purchasing power of households, raise the labor share of income, and provide the right incentives to reorient investment.”
His remarks come as U.S. President Barack Obama is in Shanghai on the first leg of a four-day visit that will grapple with economic imbalances and the future of the RMB position.
Strauss-Kahn noted that Chinese authorities were already taking steps to boost household consumption, including health care reforms.
“But more can be done to secure a lasting, structural shift toward consumption, by expanding the scope of social policies, moving ahead on financial sector reform, and undertaking corporate governance reforms,” he said.
Overall, the global economy appears to have turned a corner, Strauss-Kahn said, but the biggest risk to the outlook is a premature withdrawal of policy stimulus.
“While it is prudent to plan for so-called ‘exit strategies,’ policy makers should keep supportive measures in place until a recovery is firmly established, and particularly until conditions are in place for unemployment to decline,” he said.
