Spillover effects of Chinese market fluctuation 'exaggerated': IMF deputy chief

DAVOS - The volatility of the global financial markets has become a "new normal," while the spillover effects of Chinese market fluctuations have been exaggerated, a deputy chief of the International Monetary Fund (IMF) said Friday.

IMF Deputy Managing Director Zhu Min made the remarks in an interview with Xinhua on the sidelines of the 46th World Economic Forum annual meeting in Davos, Switzerland.

New normal

Repeated, short-term and frequent fluctuations are becoming the new normal of the global financial market, Zhu said,

He said the main reason of the volatility since the beginning of the year is that global economic growth has not reached the required level for interest rates to rise.

Stressing that the Chinese market is a part of the buffeting global financial market, Zhu said the spillover effects of the Chinese market fluctuation and potential ensuing risks have been exaggerated.

More and more people realized that China's economic transformation was not fully understood, Zhu said.

Zhu suggested that the Chinese government increase transparency and launch publicity campaigns to let the world know about the changes underway in the country's economy.

Besides, the outside world needs to better understand the problems China has encountered in the process of its economic transformation. That would allow the impact the Chinese economy can exert on global financial markets to be reduced, he said.

renminbi exchange rate

Zhu said it was an unconditional decision that the Chinese currency renminbi, or the yuan, was added to the IMF Special Drawing Rights (SDR) basket, adding that there are no conditions attached to the renminbi exchange rate, renminbi convertibility and so on.

He said the market is only focusing on the decrease in renminbi exchange rate against the US dollar, without understanding its connotation -- the yuan-dollar rate is not fixed any more because the yuan is being managed under a floating mechanism and fluctuates according to the market.

To reduce the market's fixation on the yuan-dollar rate and better reflect the market, the China Foreign Exchange Trade System began to release a yuan exchange rate composite index in December that measures the currency's strength relative to a basket of 13 currencies, including the US dollar, the euro, and the Japanese yen.