US presses Asia, China to free up currencies

Apr 14, 2007, 18:47 GMT

Washington - The United States pressed China on Saturday to revalue its currency and said the International Monetary Fund (IMF) must take a stronger role in exchange-rate surveillance or risk irrelevance.

The warning by US Treasury Secretary Henry Paulson came at a meeting of key IMF nations, including China, which the US has accused of keeping its currency artificially low to boost exports to the West.

The US hopes for 'greater exchange rate flexibility in Asian emerging economies, especially China,' Paulson said in prepared remarks for Saturday's spring meeting of the IMF's 24-nation monetary and financial committee.

More broadly, the IMF must sharpen its approach to monitoring global exchange rates for imbalances, he said.

'For the IMF to remain modern and relevant, it must reinvent itself,' he said.

'This should enable firmer surveillance in areas where market forces are not the prevailing paradigm, such as insufficiently flexible exchange rate regimes,' he said.

Paulson also called for 'bold action' in overhauling the power- sharing formula that distributes voting rights among the 185 IMF member countries, the thorniest topic on the meeting's reform agenda.

'The fund no longer looks like the world economy in which we live,' he said. 'Marginal reforms that do not fundamentally alter relative quota shares are insufficient.'

Dispute centres on the economic criteria to determine a country's IMF voting share. No breakthrough was expected at the weekend talks, though IMF Managing Director Rodrigo de Rato has suggested that members may make small steps toward an agreement.