China growing more confident in yuan debate

In addition, the report contained the views of the IMF executive board, which was mildly critical of Beijing as opposed to the staff position.

Under IMF rules, economies can choose whether to allow the staff reports to be publicly released.

“The fact that the IMF executive board was clearly much more supportive of China's currency policy than the IMF staff seem to have been, may also have emboldened China because it feels that it has fewer detractors in the international community,” Eswar Prasad, former head of the IMF China division, told AFP.

It “signals increasing confidence on China's part that it can control the debate about its currency,” said Prasad, an economics professor at Cornell University.

The IMF executive directors, in a report Tuesday on the consultations with China, said not all of them agreed that the yuan exchange rate was undervalued.

The executive board also accused the staff of using “uncertain forecasts” in making China's current account surplus projections.

“This flip-flopping is a clear indication of how difficult it is for foreign bodies to get their hands on yuan policy,” noted Kathy Lien, director of currency research at Global Forex Trading.

Some IMF insiders, speaking on condition of anonymity, were surprised by the position taken in particular by India and Brazil at the executive board on the yuan issue. One of them suggested “arm twisting” by China.

India, which had been pushing for a stronger yuan, was “quite neutral” in its statement at the board while Brazil, which had also publicly called for accelerated yuan appreciation, made a turnaround and backed Beijing, they said.

The Group of Seven developed economies basically agreed with the IMF staff position but also praised China for already taking steps to make their currency more flexible.

“It was somewhat muted criticism even from the G7, so the only statement that could be considered as mildly supportive of the staff, and not even moderately supportive of the staff, was the US position,” one source said.

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