China must communicate more clearly on FX policy - IMF's Lagarde

PARIS (Reuters) - China needs to ensure clear communication about key policies, including about foreign exchange, in light of its growing weight in the world economy, International Monetary Fund chief Christine Lagarde said on Thursday.

China has taken flack from some of its international partners for not communicating more clearly to financial markets, which has helped fuel bouts of volatility last year and at the start of this year.

"As China now plays a considerable role and is an important actor in global growth, it absolutely must communicate precisely with everyone including in the market, especially as regards its foreign exchange policy," Lagarde told a news conference.

Speaking at a seminar on the international financial architecture at the French finance ministry, Lagarde said that risks from swings in international capital flows were on the rise, which raised the importance of improving financial safety nets in place to help countries in need.

Chinese central bank governor Zhou Xiaochuan suggested that broader use of the IMF's special drawing rights might be an answer, starting with reporting central bank reserves in them and possibly issuing some bonds denominated in them.

"The SDR could be a stabilising force in the international financial system and its broader use might not be that difficult," the governor said.

Lagarde said the IMF would also need to look at how to remove the stigma attached to using precautionary and liquidity credit lines that were put in place following the global financial crisis, but which have seen limited take-up.

The seminar was intended to prepare the ground for talks on the global financial architecture under China's G20 presidency ahead of a summit in September which is to address those issues.

(Reporting by Leigh Thomas; editing by John Irish)