IMF backtracks on labeling RMB "substantially" undervalued

The IMF chose not to say that the renminbi is "substantially" undervalued in its annual report on China following significant disagreement among directors over the Chinese currency, Reuters reported. Although the phrase was used in the 2009 report and it was expected to appear in this year’s edition, some directors expressed concern that the currency determination was based on "uncertain forecasts" of China’s current account surplus. However, the directors did agree that China’s growth would likely remain strong and with low inflation for the rest of 2010. They also agreed that the decision to unpeg the renminbi from the US dollar on June 19 was a positive step which would expand the monetary flexibility of the People’s Bank of China (PBoC). Meanwhile, the PBoC issued its own statement on Tuesday saying that the fundamentals of China’s economy are "good." The central bank expects the economy to stabilize after its recent cool-down and avoid a double-dip recession in 2010.