One of China's most influential central bank officials disclosed on Saturday that the major risk factors facing the world economy are the escalation of trade disputes and policy uncertainties. For China, market forces have held the country's currency at a very suitable level.
In a speech to the steering committee of the International Monetary Fund, Yi Guang, the governor of the People's Bank of China, said that the country's capital was "deeply disappointed" by the International Monetary Fund's incapacity to realign its shareholding infrastructure to understand the country and other fast-growing economies' growing influence.
Yi moved away from the U.S. Treasury's August 5 declaration of China as a currency manipulator since China's yuan slipped below the dollar's emotionally significant level of 7. In his statement, he said that market forces have powered the decline in the yuan since the beginning of August, including uncertainty triggered by rising trade tensions.
Yi added that the yuan, also known as the renminbi or RMB, had "growing market tolerance of two-way exchange rate volatility."
Taking a jab at the "America First" negotiating stance of the Trump administration, Yi said: "In some nations, the rise of nationalism and protectionism has weakened mutual trust, diminishing their willingness to cooperate on a multilateral basis."
Yi's comment failed to mention the U.S. trade deal's "Step 1" that US President Donald Trump declared on Oct. 11, who also cautioned of the problems caused to the global economy by trade conflicts.
"In global trade and global industry structures, supply chains, and value chains, indicators of change have arisen," he added. "Trade disputes have dampened consumer confidence, which can raise the instability of the financial market and drag down economic growth."
On IMF quotas, Yi said IMF members had to respect previous agreements to change the shareholding of the IMF to represent the growing power of competitive emerging market economies and said China favored an adequately resourced IMF focused on quota capital rather than temporary borrowing arrangements.
The IMF announced on Friday that members agreed to keep its funding capacity at $1 trillion by expanding and increasing its crisis financing fund and growing bilateral borrowing agreements accordingly.
But IMF members delayed the next quota review until December 2023 in a move that preserves U.S. veto power over major fund decisions. "The IMF's leadership, accountability, and credibility were compromised by the inability to change quota allocations," Yi said.
China, analysts have noted, should continue to exert more efforts for changes of the IMF's allocations, along with the other states, "to improve the presence and representation of emerging market economies."
