The US Department of the Treasury’s senior officials criticized the lack of transparency in China’s foreign exchange swap quotas, urging the International Monetary Fund (IMF) not to simply include them in the calculation of official reserves of developing countries.
On Tuesday, October 1, Brent Neiman, Deputy Assistant Secretary of the Treasury responsible for international financial affairs, said in a speech that the lack of reporting details of the swap agreements by the People’s Bank of China has led to the IMF’s handling of these agreements being “confused and inconsistent.”
Neiman made the above comments at an event organized by the Official Monetary and Financial Institutions Forum (OMFIF) in the UK ahead of the International Monetary Fund and World Bank annual meeting later this month.
This statement comes after recent bilateral contacts between the US and China on the central bank’s currency swap quotas. Such opaque practices are believed to potentially obscure the financial difficulties faced by poor countries seeking assistance from China.
To promote the internationalization of the renminbi, the People’s Bank of China has reached a series of agreements with many developing countries. Argentina extensively utilized the currency swap quotas with China in dealing with economic and financial crises.
The issue of China’s swap quotas was one of the topics discussed at the US-China Financial Working Group meeting held in August by senior economic officials from both countries.
At the same time, Neiman also pointed out that the IMF needs to be a “frank and stern critic,” but in its annual assessment of China’s economy, it did not give enough attention to China’s exchange rate and industrial policies.
Neiman said, “The IMF did not publicly comment on the role of state-owned banks (People’s Bank of China) in managing China’s exchange rate, nor did it explain why the changes in the People’s Bank of China’s balance sheet are inconsistent with China’s international balance of payments data on reserves transactions.”
Neiman also stated that the IMF lacks transparency in disclosing the external financing guarantees provided by China and other countries for loan programs. He said that in recent loan programs for Argentina, Ecuador, and Suriname, these guarantees have not been fulfilled or have been severely delayed.
In its program documents, the IMF only referred to China as Argentina’s “main bilateral creditor,” and added that this “overly polite” treatment may reduce the willingness of creditors to promptly honor their guarantees.
Last week, the IMF approved a $7 billion loan program for Pakistan, which includes financing guarantees from China, Saudi Arabia, and the United Arab Emirates, but refused to disclose details of the guarantees.
The US Department of the Treasury manages the US’s major shares in the IMF and has issued warnings to China over the past year on issues such as overcapacity, technology transfer, and currency practices.
(This article was referenced from reports by Bloomberg and Reuters)