US Treasury official criticizes IMF for being 'too polite' and not 'ruthless to tell the truth' about China's economic policies

The latest development in the ongoing scrutiny of China's economic policies has been a senior US Treasury official's criticism of the International Monetary Fund (IMF) for its lenient stance.

What happened: The International Monetary Fund (IMF) has been criticized for being “too polite” regarding China's economic policies, Reuters reported.

Brent Neiman The Treasury's deputy undersecretary for international finance said the IMF has not applied sufficient analytical rigor to China's industrial policies. At an event hosted by financial think tank OMFIF, Neiman emphasized that the IMF should “ruthlessly tell the truth” and be more transparent about financial guarantees from China and other countries.

Neiman noted that the IMF's economic assessments of China do not adequately address exchange rate and industrial policies. He noted that the IMF does not comment publicly on the role of state-owned banks in managing China's exchange rate or discrepancies in the People's Bank of China's balance sheet and reserve transactions.

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Neiman also criticized the IMF's lack of transparency in disclosing external financing guarantees, citing recent programs for Argentina, Ecuador and Suriname. He mentioned that these guarantees were not fulfilled or were significantly delayed. The IMF recently approved a $7 billion program for Pakistan, which included financing guarantees from China, Saudi Arabia and the United Arab Emirates, but did not provide details.

The IMF and World Bank will review various policies during their annual meetings in Washington, scheduled for the week of October 21.

Why is it important: The United States has increasingly been vocal about China's opaque lending practices, particularly its emergency loans to indebted countries. The United States expressed concern about China's secret emergency loans and urged greater transparency. Neiman highlighted that these loans, often granted through swap agreements, economically link countries closest to China while imposing high interest rates. This issue was previously discussed by the Biden administration with Chinese officials in Washington.

China's central bank facilitates these loans, allowing countries to borrow Chinese renminbi and use their US dollar reserves to pay off foreign debts. This agreement has raised alarm bells due to the lack of transparency and the possibility of deepening economic dependencies on China.

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This story was generated using Benzinga Neuro and edited by Pooja Rajkumari