Lagarde says yuan moving in right direction

Updated: 2012-04-20 11:23

By Ma Liyao in Washington (China Daily)

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Lagarde says yuan moving in right direction

IMF chief Christine Lagarde says China's move to widen the trading band of the yuan is in the right direction. [Stephen Jaffe / International Monetary Fund / Via AFP]

Christine Lagarde, head of the International Monetary Fund, welcomed China's latest move to widen the trading band for the yuan as an important one to internationalize the currency.

"It's not a baby step, it's a very good step in the right direction," Lagarde told reporters as the IMF and World Bank spring meetings in Washington. "I certainly hope it's not the last step."

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Last weekend, the People's Bank of China said it would begin allowing the yuan to trade in a wider daily range against the dollar. A similar move was made five years ago.

The new revision expands the yuan band against the dollar to 1 percent; the previous limit was 0.5 percent.

Lagarde responded the day of the central bank's announcement by saying the move underlined China's commitment to rebalancing its economy toward domestic consumption and giving market forces more leeway to determine exchange rates.

At Thursday's briefing, the IMF managing director said she considers the latest move to be a part of "a longer journey" on the part of Chinese officials.

In Beijing, Foreign Ministry spokesman Liu Weimin said China is willing to discuss funding the IMF with the fund's other member countries.

Replenishing its reserves is atop the agenda for the IMF at the three-day meetings that begin Friday. Lagarde said she expects a big boost in financing to help the fund safeguard countries from the eurozone's debt crisis.

So far, the IMF has raised $320 billion, all from European countries and Japan, and it wants to secure at least $400 billion, Bloomberg News reported.

"We cannot sort of propose one-size-fits-all solutions," Lagarde said, stressing that "everything we do has to be country specific".

Finance ministers from the BRICS group of leading emerging-market nations - Brazil, Russia, India, China and South Africa - were expected to meet in Washington later Thursday.

Brazil and Russia have said they're willing to chip in to replenish the reserves, but they want to get more voting power at the IMF in return.

The Group of Seven developed nations were set to talk about bulking up the fund's resources at an informal meeting later Thursday, and the same topic was set to be addressed by the Group of 20 representatives at a dinner Thursday and again at a meeting Friday.

The United States, the IMF's biggest shareholder, has declined to provide new money but on Wednesday threw its weight behind fundraising efforts by other nations. The US previously had pressed for bolder action from Europe.

US Treasury Secretary Timothy Geithner on Wednesday called for a "clean and unequivocal commitment" by European countries to ensure they can borrow at sustainable interest rates.

Calling the eurozone the "epicenter of potential risk" for a world economic recovery that is "timid and fragile", Lagarde also urged European Union policymakers to inject some of their bailout funds directly into troubled EU banks.

Europe has taken "significant steps" to combat the crisis and erect a financial firewall to contain it, she said, adding "there is a little bit missing here or there, but it shows significant determination to defend their currency zone".

"We expect our firepower to be significantly increased as an outcome of this meeting," Lagarde said.

She also tried to raise money for the Poverty Reduction and Growth Trust, the IMF's pooled resource from which it draws low-interest loans for low-income countries.

World Bank President Robert Zoellick, who is stepping down in June after a five year term, also said on Thursday that he wants to build a "safety net" for all countries.

"Safety nets can transform people's lives and provide a foundation for inclusive growth without busting budgets. If you want to wait until the crisis is coming, it's too late," he said.

Zoellick also said that without efforts on structural reforms in both developing and developed countries, the global economy will keep stumbling.

Jim Yong Kim, a physician with experience in public health and international development, was elected this week to succeed Zoellick. Kim is a US citizen, though he was born in the Republic of Korea.

Reuters contributed to this story.