The IMF have recently stated that they are going to reduce China’s long-term forecast for its current account from a surplus from 7% of GDP to 5% of GDP – to be published in the IMF’s magazine entitled – “The World Economic Outlook (WEO)”. This might be useful if you are going to indicate that your currency is actually undervlued.
From the Wall Street Journal
Since at least 2009, the IMF has been describing China’s currency as “substantially undervalued”—and before that it sought to use the term “fundamentally misaligned,” though Beijing blocked that designation. China’s government intervenes in the market to keep the currency from rising and thus endangering China’s exports. The higher the exchange rate, the more costly a country’s exports to foreign customers.
Since 2008, the IMF has consistently overestimated how large China’s current-account surplus would remain. IMF officials say that’s because the fund overestimated how quickly U.S., Europe and Japan would recover from the global financial crisis of 2008 and 2009 and underestimated how much China’s economy would change so it relied less on exports.
In 2007, China’s current-account surplus as a share of GDP peaked at 10.1%. In 2008, the IMF forecast it would stay close to 10% in the years ahead. That formed the basis of the argument that the yuan was “substantially undervalued” and years of diplomatic pressure on China to allow more rapid appreciation. In fact, China’s current-account surplus in 2011 came in at just 2.8% of GDP.
This change to the IMF’s estimate will assist China in convincing its critics that it need not let the currency fall much further.