UPDATE 1-IMF plays down China currency-reform urgency

Wed Jan 28, 2009 4:40pm GMT

(Adds quotes, details, background)

By Glenn Somerville

WASHINGTON Jan 28 (Reuters) - The chief economist for the International Monetary Fund said on Wednesday this was not the right time to push China on its foreign-exchange policy, in an effective rebuke of the Obama administration's bid to do so.

"It is probably not the right time to focus on the Chinese exchange rate, given that it is not a central element of the world crisis," Olivier Blanchard said at a press conference.

"There are many other things we should be thinking about," Blanchard said. "It is an item on the list, but it is not at the top of the list."

Treasury Secretary Timothy Geithner, in written responses to questions submitted at a Senate confirmation hearing, said last week that President Barack Obama considers China to be "manipulating" its currency.

He said the United States would "aggressively" push Beijing to move faster on currency policy reform to let market forces play a larger role in setting its value.

A number of analysts have criticized Geithner's remarks, which the White House subsequently played down by saying that he was only repeating comments made by Obama while he was campaigning last year for the presidency.

The IMF said that while global economic growth was slowing to a virtual standstill in 2009 and 2010, China was still seen growing at rates of 6.7 percent and 8 percent, respectively.

"I don't think we should obsess about an exchange rate," the IMF's Blanchard said, adding it was more important to consider whether Beijing was pursuing macroeconomic policies that will help it and other economies around the world.

In the long run, it would be helpful for China to rely less on export-led growth and spur domestic demand, which may naturally lead to a higher-valued yuan currency, he added.

"In the longer context, it seems to me that, yes, it's probably a good thing for China and for the world to have an appreciation of the (yuan)," Blanchard said.

"But again, I do not think this is a central element of the crisis. It's something we should be thinking about, but not obsessing about at this point." (Reporting by Glenn Somerville; Editing by Jan Paschal)

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