China should press ahead with currency reform, says US official

27/05/2015 00:59 AST

China must press ahead with currency liberalization plans for the yuan to join the International Monetary Fund's reference basket of currencies, a senior US Treasury official said on Tuesday.

In a call to preview discussions among Group of Seven nations in Germany this week, the official said the United States would emphasize the need to find a pragmatic solution for Greece and urge all parties to come to an agreement.

Failure would hurt the Greek people but could also have unpredictable consequences for the European and even global economies, said the official, who spoke on condition of anonymity.

More broadly, major countries had to do more to boost growth and stimulate demand, and an uptick in growth in some economies did not mean it was time to declare victory, the official said.

The IMF said earlier on Tuesday that the yuan was no longer undervalued but urged China, which wants its currency to be included in the Special Drawing Rights basket, to quicken reforms.

The senior Treasury official said the United States urged China to continue and complete plans to open its capital account and liberalize its management of the exchange rate.

Those reforms were needed for the yuan to join the SDR basket, the official said.

Although China had made significant progress with reforms and the yuan had appreciated, more work was needed, and the official noted the last US assessment was that the currency remained significantly undervalued.

The IMF has started its review of the SDR basket, a process which usually happens every five years. Including the yuan would promote the currency as a potential global reserve currency and could further increase its international usage.

China wants to internationalize the yuan, partly to provide an alternative to the dollar as a global currency and in turn reduce its own vulnerability to fluctuations in the greenback.

The US official also said it was important for the international community to do all it can to support Ukraine and its economy.

Reuters