China remains committed to market orientation: IMF

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After China's currency devaluations sent tremors through global markets last week, Beijing set the yuan at a slightly stronger level Monday as investors continue to gauge the health of the world's second-largest economy.

Despite opposition from those crying foul over a so-called currency war or those who lack the confidence in China's central bank to counter slowing growth, the International Monetary Fund's mission chief for China, Markus Rodlauer, applauded the "market-oriented" move in an interview on CNBC's "Squawk on the Street."

"Adjustment is never easy ... and in China they are adjusting to a number of problems they are having," he said. "I think we need to welcome this adjustment because if it doesn't happen now, it'll happen next year or the year after in a much more disorderly way."

Chinese 100 yuan (RMB) bank notes being counted at a bank in Huaibei, in eastern China's Anhui province.
STR | AFP | Getty Images

The IMF projects that orderly rate of decline will accelerate into next year, to GDP growth of just 6 to 6.5 percent, compared to 6.5 to 7 percent this year, citing problems with large credit growth, an overexposed real estate sector and environmental issues.

While Rodlauer insists the devaluation will bolster China's recovery efforts, others, like Moody's senior vice president of credit policy, Marie Diron, are not so sure.

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"The depreciation is not significant enough to have a big impact on either the Chinese economy or the rest of the world," she said.

Some consider it a possibility that China would further devalue its currency, a move that could pit domestic stability against global expansionist policies like convincing the IMF to view the yuan on an even level with the dollar and pound as an official reserve currency. However, Rodlauer rejected the notion that Beijing would abandon a market-oriented currency policy.

"I have no doubt that this is the direction they're going to follow, gradually, towards more market orientation," he said. "They have it clear in their mind, and they will not get cold feet about their overall long-term goals."

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Nomura Securities Global Head of FX Strategy Jens Nordvig didn't rule out the possibility of another devaluation, adding that it would at least be feasible considering China's capital reserves of $3.6 trillion compared to total liabilities owed to foreigners at about $1.1 trillion.

"They have the whole liability structure covered three times over, I think they can control it," he said. "But they can't fix [their challenges] from one day to the other with just moving their currency a couple percent."