FRANKFURT, June 22 (Reuters) – European Central Bank President Christine Lagarde on Monday urged global leaders to discuss undervaluation of the Chinese currency as a facet of the imbalances endangering the global economy.
China has consistently denied that it manipulates its currency for trade advantage, but its surging trade surpluses are one of several macroeconomic mismatches worrying leaders of the Group of Seven (G7) nations who met last week in France, along with chronic U.S. deficits and Europe’s underinvestment.
Europe has struggled to compete with China in sectors it used to dominate, such as high-end cars, partly due to Chinese goods being cheaper.
Lagarde cited International Monetary Fund research indicating that the Chinese currency, also known as renminbi, was 15-16% undervalued when its nominal exchange rate was adjusted for international differences in inflation.
“That’s the situation as it is, which justifies completely the fact that there has been, and I hope there will be, further discussions of excessive imbalances, which include a currency aspect to it, between the G7 leaders and beyond,” Lagarde told an event in Brussels.
Lagarde dismissed the notion of a new Plaza Accord to strengthen the yuan, however, saying the 1985 international deal to weaken the dollar was struck when “times were different”.
(Reporting by Francesco Canepa; Editing by Kevin Liffey)
