China should allow its currency to strengthen and rely more on domestic consumer spending instead of ever-rising exports, International Monetary Fund officials said on Wednesday in Beijing at the end of a 10-day visit to China.
The cautiously worded suggestion that a stronger currency may be needed represents a subtle shift for the fund. The I.M.F. has previously suggested that China should allow more flexibility in the value of the currency, the renminbi, while staying mostly silent on whether it believes the currency should strengthen or weaken against the dollar and other currencies.
The visit to China by the I.M.F., the first of its kind in 18 months, came as the Washington-based multilateral institution finds itself increasingly caught between the Trump administration and the Chinese government.
Kristalina Georgieva, the managing director of the fund, said at a news conference that the I.M.F. was not asking the Chinese government to intervene in markets to make sure the currency strengthens.
Ms. Georgieva did not detail how she expected the renminbi to appreciate without government action, and she repeated previous calls for the currency to be flexible. The Chinese government had no immediate response to the I.M.F.’s assessment, although its response will be included when the fund issues a full report in a couple months.
American and European officials hold considerable sway over the governance of the I.M.F., which was established at the end of World War II to police stability in currencies and international finance. Today 191 nations are members.
The Trump administration has pressured the I.M.F. to shift from its recent focus on climate change to return to its original mission. Treasury Secretary Scott Bessent installed his former chief of staff, Dan Katz, as Ms. Georgieva’s top deputy in October.
“In line with its core mandate, the I.M.F. needs to call out countries like China that have pursued globally distortive policies and opaque currency practices for many decades,” Mr. Bessent said in a speech in April.
Mr. Katz’s new role as first deputy managing director gives him responsibility for the fund’s inspection visits to member countries like the one to China.
But China also has considerable leverage at the fund. The I.M.F. needs Beijing’s help in coping with severe debt problems in dozens of developing countries that have borrowed heavily from China and cannot afford repayments.
Ms. Georgieva said that the renminbi could appreciate in “real” terms, which means adjusted for inflation. With producer prices falling 2 percent a year in China and rising several percent a year elsewhere, the value of each renminbi may need to rise 5 percent or more a year against other currencies just to stay even in inflation-adjusted terms.
China’s weak currency has helped fuel the flood of its cheap exports globally, drawing criticism and tariffs by the United States, the European Union and other trading partners trying to protect their own industries. China reported on Monday that its trade surplus with the rest of the world had climbed past $1 trillion in the first 11 months of this year.
A stronger Chinese currency would make the country’s exports costlier and less competitive in foreign markets, while making imports more affordable for domestic consumers. But more expensive Chinese exports could push up prices for consumers in the United States and elsewhere.
Ms. Georgieva also called for the Chinese government, heavily indebted and facing shrinking tax revenues, to spend more money to help China’s consumers and to stabilize the country’s real estate sector.
“It’s an unexpected role reversal that the I.M.F. — patron saint of fiscal restraint — is nudging China toward a debt-fueled stimulus,” said Han Lin, the China country director for the Asia Group, a Washington consulting firm.
A research paper last month by Brad Setser and Mark Sobel, two former U.S. Treasury officials, has drawn more attention to China’s currency from business leaders and economists outside the country. The pair pointed out that the I.M.F.’s own formula for currency valuation suggested that the renminbi was undervalued by at least 18 percent.
Mr. Setser wrote in an email Wednesday that official Chinese data indicated that the country’s central bank and state-controlled commercial banks are on track to buy another $250 billion worth of foreign assets this year, effectively limiting the appreciation of the renminbi.
Keith Bradsher is the Beijing bureau chief for The Times. He previously served as bureau chief in Shanghai, Hong Kong and Detroit and as a Washington correspondent. He lived and reported in mainland China through the pandemic.
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