Economics
IMF Says China Should Keep Yuan Flexible as Trade War Widens
- New U.S. levies rising to 25% could reduce growth 0.8 point
- Fund says ‘significant negative spillovers’ possible globally
An employee at a currency exchange store counts Chinese one-hundred yuan banknotes in Hong Kong, China.
Photographer: Xaume Olleros/Bloomberg
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China should keep its exchange rate flexible if additional intensification of the trade war with the U.S. threatens further harm to the economy, according to an International Monetary Fund report completed before the recent escalation of tensions.
If the U.S. raised tariffs to 25% on remaining Chinese imports, that could trim growth by 0.8 percentage point over the following year by reducing demand and tightening financial conditions and lead to “significant negative spillovers globally,” the IMF said in its annual report on China’s economy released Friday in Washington.