The Chinese currency is “substantially” undervalued, a senior IMF official said Wednesday, despite Beijing's action to let the yuan trade more freely. “I think the staff view on the currency is that the renminbi (yuan) remains substantially below the level that is consistent with medium-term fundamentals,” said Nigel Chalk, who recently led an International Monetary Fund mission to China for annual consultations on Beijing's policies. He made the comment following a split within the IMF over the current value of the Chinese currency apparent in a report issued late Tuesday 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 United States, 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 Beijing were not published together with that of the fund's executive board, contrary to its practice in reporting on most economies. “Our expectation is that, that (staff views) will be published but the decision on whether to publish is the decision of the Chinese authorities and they have not yet made the decision,” Chalk said. He said the report released Tuesday contained “summary views of the executive board after they reviewed the staff report and heard from 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 appreciated less than one percent. The report also said that “many directors stressed that, over time, a stronger renminbi (yuan) would help facilitate a shift from exports and investment to private consumption as the principal driver of economic growth.” The US stock market edged lower Wednesday. The Dow fell 7.64 points (0.07 percent) to 10,530.05 by 1400 GMT.
