"We believe the Chinese economy is resilient and strong enough to withstand that kind of significant variation in the market,' she said during a press conference on Wednesday. Lagarde was referring to the 27% drop in the benchmark Shanghai Composite Index, since its high on June 12. But she also pointed to the index's impressive 74% increase over the past year.
Lagarde 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 Japanese yen. Inclusion of the yuan would be a prestigious milestone for China, but a final decision is still pending.
In a move to stem 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. Although those measures raised eyebrows among many analysts, Lagarde wasn't fazed.
"No one should be surprised by the fact that they want to maintain an orderly movement and avoid a disorderly functioning of the market," she said.
Meanwhile, Lagarde said the eurozone is "beginning to turn the corner," despite Greece's ongoing debt woes. She referred to Greece's debt as "unsustainable" and said a "significant" restructuring program is needed for Greece to flourish.
As for global economic growth, Lagarde reiterated the IMF's forecast of 3.3% growth for 2015 and 3.8% for 2016.