China’s dramatic pullback in stocks isn’t a threat to its economy, at least according to Christine Lagarde, the managing director of the International Monetary Fund. ‘We believe the Chinese economy is resilient and strong enough to withstand that kind of significant variation in the market,’ she said in a virtual press conference on Wednesday, referring to the 27 percent drop in the benchmark Shanghai Composite Index, since its high on June 12. Lagarde also pointed out the index’s impressive 74 percent jump over the past year. She said the recent volatility won’t dampen China’s hopes of having its yuan currency included in the IMF’s emergency reserves, which countries access in times of need. The fund, also known as the special drawing rights basket, includes dollars, euros, pound sterling and the Japanese yen. Inclusion of the yuan would be a prestigious milestone for China, but a final decision is still pending. To prop up the selloff in Chinese stocks, which was sparked by too many investors buying stocks on margin, Chinese officials at one point suspended trading in roughly half of its stocks and banned large shareholders from exiting positions for at least six months. While these measures raised eyebrows among many analysts, Lagarde isn’t fazed. ‘No one should be surprised by the fact that they want to maintain an orderly movement and avoid disorderly functioning of the market,’ she said.
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