Unfair to blame China for any currency war, says Rajan

Reserve Bank of India (RBI) Governor Raghuram Rajan voiced support for the yuan's International Monetary Fund (IMF) ambitions, combining a call for multilateral institutions to grant greater recognition to emerging markets, with a dismissal of claims that China sparked a currency war in August, according to the South China Morning Post.

It's unfair to pin the blame on the August 11 yuan devaluation because currencies were already declining due to the "unconventional monetary policies" of some nations, Rajan was cited as saying in an interview with the newspaper. RBI is including yuan assets to diversify its holdings, he said.

IMF should accommodate the currencies of large economies with strong positions in global trade and finance, Rajan was cited as saying in the interview. The Washington-based lender and other multilateral institutions such as the World Bank must continue to pay greater attention to emerging markets, he said in the report, adding that the agencies need a change in governance.
 

"Rajan is showing his support for emerging economies, but at the same time he is putting his hat in the ring and saying, in future, India should also be considered for inclusion," said N R Bhanumurthy, an economist at the National Institute of Public Finance and Policy in New Delhi.

Regional Competition
Rajan's comments come before the yuan's now almost certain inclusion in the IMF's Special Drawing Rights, a move that Standard Chartered Plc estimates could attract as much as $1.1 trillion of inflows into Chinese assets over the next five years.

Rajan's support for the yuan is especially significant as India and China, among the world's fastest-growing major economies, have developed a rivalry for foreign investment. Among Indian Prime Minister Narendra Modi's favored projects is his Make in India program, which seeks to transform the nation into a top global manufacturing destination, an area where China is the dominant player.

The yuan strengthened 0.9 percent in the two months through Oct. 31, swinging from a 2.6 percent plunge in August. It was little changed on Friday, closing at 6.3850 a dollar in Shanghai. In India, the rupee rose 1.9 percent in the September- October period and last traded at 66.1950 against the greenback.