A senior International Monetary Fund official has said the Chinese currency is 'substantially' undervalued, despite the country's move to let the yuan trade more freely.
Nigel Chalk, who recently led an IMF mission to China for annual consultations on its economic policies, made the comment following a split within the IMF over the current value of the Chinese currency.
The split was apparent in a report issued late last night by the Washington-based fund's executive board after the consultations.
The differences in view appeared between the board and the staff, who went on the mission, as well as within the board.
'Several directors agreed that the exchange rate is undervalued,' the report said, without citing the countries they represented. It was believed that the US, Germany, France and Britain were among those who took that position.
'However, a number of others disagreed with the staff's assessment of the level of the exchange rate, noting that it is based on uncertain forecasts of the current account surplus,' the report said.
The IMF staff views on the consultations with China were not published together with that of the fund's executive board, contrary to its practice in reporting on most economies.
Mr Chalk said he expected the staff views to be published, but the decision lay with the Chinese authorities.
Many analysts believe the yuan remains vastly undervalued against the dollar despite the June 19 announcement by the Chinese central bank to let the yuan trade more freely. Since the decision, the yuan, which had been effectively pegged at 6.8 to the dollar since mid-2008, has strengthened by less than 1%.
