The head of the IMF is today arguing the case to redefine and expand its role.
The Fund must better detect risks that individual economies pose to the rest of the world, as well as offering liquidity early during a financial crisis, Dominique Strauss-Kahn is saying. The institution should also better monitor large, interconnected financial firms to construct a “risk map”.
The need for global oversight is obvious, but the proposals might be unpopular with existing central banks. A set-up linking the IMF directly with large banks could bypass the local central bank entirely. It is unclear whether central banks would need to agree to the new role.
It may be good timing for expansion. Prior to the crisis, the fund was struggling both for money and purpose. Now its remit might include global stability. The way to do that is to focus less on individual countries, and more on the linkages between them: “We have not paid enough attention to the linkages and spillovers between economies – including those that transmit through the arteries of the global financial system,” Mr Strauss-Kahn is telling the annual meeting of the Bretton Woods Committee. (Bloomberg)
China is carrying out stress tests on labor-intensive industries to gauge the effect a stronger yuan would have on earnings, reports Bloomberg (itself reporting local paper the 21st Century Business Herald). Consequent speculation on the yuan has pushed forward prices up.
The currency may appreciate as soon as the second quarter and end 2010 with a 2 per cent gain, Stephen Green, head of China research at Standard Chartered Bank Plc in Shanghai, told Bloomberg.
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