The world’s biggest economies on Saturday strengthened their commitment to reducing global imbalances but stopped short of making these pledges binding.
The “multilateral consultations” undertaken by the International Monetary Fund, included plans by China to make its exchange rate more flexible “in a gradual and controlled manner” against a basket of currencies.
There's not much to suggest that the "gradual and controlled manner" is having any impact quite yet. Brad Setser puts it about as succinctly as it can be put:
There is just no way to get around the fact that China bought a ton of foreign exchange in the first quarter.
The Treasury is turning up the heat...
U.S. Treasury Secretary Henry Paulson stepped up his push for rule changes that would allow the International Monetary Fund to monitor and disclose cases of countries that manipulate their currencies, calling for action "very soon.''
"Reform of the IMF's foreign-exchange surveillance is the linchpin'' of needed changes in the 63-year-old fund, Paulson said today in a statement to the IMF's semiannual gathering in Washington. "We look forward to action in this important area very soon after these meetings.''
... but the response of the Chinese government sounds pretty familiar:
"We have noted the efforts to strengthen Fund surveillance since the Singapore Meetings, including through possible revision of the 1977 Decision on Surveillance over Exchange Rate Policies," [Hu Xiaolian, deputy governor of the People's Bank of China] said.
"In this regard, we wish to emphasize that, first, revision of the Decision should not proceed too hastily," she said. "In making adequate and careful analysis, the Fund must take the opinions of all concerned parties into account and build broad consensus among all member countries to ensure that it would benefit them all."
Second, in strengthening surveillance, the Fund should be realistic, and not overestimate, the role of exchange rate, Hu said.
"Biased advice would damage the Fund's role in safeguarding global economic and financial stability," she said, while emphasizing that the focus of surveillance should be consistent with the purposes laid out in the Fund's Articles of Agreement.
"Due respect should be paid to the fundamental role of sustaining growth in promoting external stability. External stability can only contribute to overall sustained stability when anchored by domestic stability," she concluded.
Also Saturday, Hu Xiaolian said that China's economic growth model has undergone welcome changes and its economy will continue on path of steady and fast growth.
"The Chinese economy is projected to remain on a fast growth track -- exceeding 8 percent in real terms -- in 2007," she said, adding that the government will give more emphasis to the quality and sustainability of economic growth.
She also said the reform of the China's foreign exchange regulatory framework has steadily deepened. "The RMB exchange rate formation mechanism is being improved and flexibility of the RMB exchange rate has increased significantly," she said.
Sounds like the status quo to me.