Lagarde said Wednesday some Asian countries can ease monetary
tightening slightly, referring to those that have tightened
extensively to fight inflation.
For China, though, fiscal policy is a more appropriate lever to pull
if the economy needs support, she said, and there's still scope to
further tighten monetary policy to restrain credit growth.
"(China's) fiscal policy is appropriately moving back to balance," Ms.
Lagarde said. "But if the growth outlook deteriorates significantly,
it could become the first line of defense, given ample fiscal space
and capacity to deploy resources quickly."
Speaking at a forum in Beijing, Ms. Lagarde also said China needs a
stronger currency "in real effective terms," meaning against a basket
of currencies and adjusted for inflation, though she added she has
already seen some progress on that issue.
Ms. Lagarde also commended China for being on the "right path" in
shifting its economic growth model more toward domestic demand. She
added that inflation is also easing in China.
Official data Wednesday showed China's consumer price index in October
was up 5.5% from a year earlier, slowing from September's 6.1% pace.
Separately, Mr. Lagarde reiterated that the global economy has entered
a "dangerous, uncertain" phase, and that advanced economies must
accelerate structural reforms to regain competitiveness and create
The IMF chief is is visiting China at a time of mounting concerns over
the euro zone sovereign debt crisis, as Greece and Italy grapple with
domestic politics and struggle to find a solution to their severe
The U.S. dollar was at 6.3365 yuan around 0411 GMT, down from
Tuesday's close of 6.3462 yuan. The yuan has risen 4% against the
dollar this year and 7.7% since June 2010, when China ended its
currency's dollar peg.
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