RMB is 'moderately undervalued', says IMF

The IMF lowered its forecast for China’s medium term current account surplus as percentage of GDP.

OCBC Treasury Research noted:

The IMF lowered its forecast for China’s medium term current account surplus as percentage of GDP to 4-4.5% and softened its tone on RMB value. The IMF said RMB is “moderately undervalued” against a basket of currencies after years of appreciation.

Meanwhile it also praised China’s efforts to reduce external imbalance. However the agency also highlighted China’s significant domestic imbalances fueled by investment-led growth model and warned risks associated with slowing investment as well as rising non-performing loans as a result of sharp slowdown.

China will expand its value-added tax reform trial from Shanghai to ten other provinces and cities effective from 1 Aug. The companies in the trial areas will pay value added tax instead of business tax. Shanghai was the first city starting this trial from beginning of this year. Data showed that 89.7% companies benefited from lower tax burden with total saving of CNY914mn in the first half.