US President Barack Obama and his Chinese counterpart Hu Jintao walk in Seoul. Photo: REUTERS
China pushes back against pressure from Paris and Washington for swift reform of a global monetary system.
| DANIEL FLYNN and KEVIN YAO |
Published: 2011/04/01 07:35:40 AM |
CHINA pushed back yesterday against pressure from Paris and Washington for swift reform of a global monetary system that French President Nicolas Sarkozy says is so unstable it could tip the world economy back into crisis.
The diverging views, on display at the start of a meeting of the Group of 20 (G-20) leading economies, underscored the difficulty Mr Sarkozy faces to meet his goal of drafting a blueprint for the overhaul of the global monetary order by the end of the year.
"Without rules, the international monetary and financial system is incapable of forestalling crises, financial bubbles and the widening of imbalances," Mr Sarkozy told a gathering of finance ministers, central bankers and prominent academics.
"Without rules and supervision, the world runs the risk of being condemned to increasingly serious and severe crises."
France is the chairman this year of the G-20, which brings together developed and emerging economies accounting for about 85% of global output.
Beijing, despite being asked to host the forum, has not shown great enthusiasm for the initiative or for Mr Sarkozy’s broad plans for reform. China fears the thinly veiled aim is to force it to let the yuan trade more freely and to dismantle its capital controls more quickly than it wants to.
"The reform process will be long-term and complex," Chinese Vice-Premier Wang Qishan said in his opening remarks. Mr Sarkozy asked whether it was not time to broaden the Group of Seven (G-7) industrial countries, one of whose principal purposes is to police the global currency markets.
The group reasserted its role earlier this month when G-7 central banks acted in concert to sell the yen. In doing so, it reversed a surge in the currency that threatened to deepen the damage to Japan’s economy, already reeling from natural disasters .
A senior German official said Berlin was also in favour of currency questions being addressed by a broader group than the G-7, perhaps incorporating the Bric countries — Brazil, Russia, India, China — along with Mexico.
US Treasury Secretary Timothy Geithner questioned whether an international effort was really needed to cure the ills in the global monetary system. Inconsistency in exchange rate policies was the biggest flaw, he said.
He noted that some emerging countries ran tightly managed currency regimes that fuelled inflation risks in their economies, magnified appreciation pressures in others and prompted calls for protectionism.
"This asymmetry in exchange rate policies creates a lot of tension," Mr Geithner said. "This is the most important problem to solve in the international monetary system today."
He said the solution was not complicated. "It does not require a new treaty, or a new institution. It can be achieved by national actions to follow through on the work we have already begun in the G-20 to promote more balanced growth and address excessive imbalances," he said.
Mr Wang said Beijing was indeed taking steps to wean its economy off exports by boosting domestic demand . Reuters
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