The head of the International Monetary Fund has said he would like to see greater flexibility for China’s currency and reform of its banks. The weak currency gives China trade advantages and Rodrigo Rato – on an Asian visit – praised Beijing’s decision to no longer link its currency exclusively to the dollar but he also called for more effort: “The mechanism that the Chinese authorities decided last summer calls for the currency to move in a relationship to a basket. Well, we think they should let that happen in a more freer way, but we have to recognise that the Chinese authorities have taken important steps in modernising the foreign exchange system.”
Rato said he has no problem with China’s soaring economic growth – over 11% last quarter – as he believed it was a key factor in global expansion.
The 2008 Olympics will stimulate the economy even more and the Beijing government has raised interest rates and made other moves to cut banks’ levels of lending, but booming exports continue to fuel the red hot economy.