The International Monetary Fund’s (IMF) Article IV Consultation with the People’s Republic of China came out a couple days ago. It’s a “30,000-foot” view of the direction of the Chinese economy during 2009. Frankly, there’s not much that’s revelatory in the report. The brief survey rather strikes me as a group of IMF bigwigs sitting at a dinner banquet with a group of Chinese government bigwigs making small talk, hoping the Chinese really will invest big in IMF bonds. The Chinese have been quite vocal this year about the long-term wisdom of the U.S. dollar as the world’s reserve currency, given the huge debts the U.S. government is running up and the difficulty China is having in getting some of their savings back into the country.

As the Financial Times reports on the RMB valuation topic:

IMF directors were divided over that issue, according to the report. Some thought the renminbi remained “substantially undervalued” and should be strengthened as part of a “comprehensive strategy to rebalance the economy”. Others said it was difficult to make exchange rate assessments and the currency would only play a “supplementary role”.

I fall squarely in the “supplementary role” camp as China already has a raft of economic issues it has to deal with. And though the powers that be can be heavy-handed in dealing with dissent, stability of the society as it drives Mach-3 to modernization is not a bad thesis.

So I’m tickled when I read in the IMF report that:

Directors recognized that, over the near term, rebalancing the economy could raise unemployment as jobs are shed in export-oriented sectors…Directors believed that, over a longer horizon, the employment gains from rebalancing towards domestic consumption and an increase in service sector employment should outweigh short-term losses. “

Hmph… easy for an economist to say. Just try running a country.