IMF Says China Should Keep Yuan Flexible as Trade War Widens

Date: 10 August 2019 - 22:02

News ID: ۶۹۱۸۵

WASHINGTON (Bloomberg) - China should keep its exchange rate flexible if additional intensification of the trade war with the U.S. threatens further harm to the economy, according to an International Monetary Fund report completed before the recent escalation of tensions.
If the U.S. raised tariffs to 25% on remaining Chinese imports, that could trim growth by 0.8 percentage point over the following year by reducing demand and tightening financial conditions and lead to "significant negative spillovers globally,” the IMF said in its annual report on China’s economy released Friday in Washington.
"Against this shock, further easing, primarily through fiscal measures, would be warranted,” the IMF said in staff comments dated July 12. "The exchange rate should remain flexible and market-determined to help absorb the tariff shock. Greater depreciation pressures and potential capital outflows will call for clear public communication and possible FX intervention to counter disorderly market conditions.”
President Donald Trump last week threatened to impose a 10% tariff on a further $300 billion in Chinese imports starting Sept. 1 and said levies could eventually go higher.