The IMF has announced to overhaul its international surveillance system which has been in operation since 1977. The new surveillance system will impose more rigorous obligations on Members to protect the stability of international financial system. It seems no coincidence that this decision has been made amid the high-profile debate in the U.S. Congress over China’s alleged renminbi manipulation. The U.S. Treasury, which has been more reserved in this issue than Congress, welcomed the decision. The Financial Times reported that:
“Warning lights will include large-scale currency intervention, the accumulation of reserves and “fundamental exchange rate misalignment” – a term that mirrors language in a bill before the US Congress that would impose penalties on nations that failed to correct such misalignments.”
(IMF to scrutinise exchange rate policies, June 18, 2007, http://www.ft.com/cms/s/6b034b14-1de1-11dc-89f7-000b5df10621.html)
It remains to be seen to what extent this new IMF mandate will be able to quiet the U.S. Congress as well as truly influence China’s foreign exchange policy.
