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G7 pressures China over currency reforms
(Business, The (London) (KRT) Via Thomson Dialog NewsEdge) Apr. 23--Finance ministers from the Group of Seven (G7) richest countries have urged faster reform of China's currency policy this weekend, in a move that threatens to push down the greenback and fuel international tensions. They also expressed concern at the dangers to global growth from high energy prices and protectionist tendencies.
The G7 ministers and central bankers stepped up the pressure on Beijing, whose renminbi is undervalued, by naming China twice in their final communiqu. It said: "Greater exchange rate flexibility is desirable in emerging economies with large current account surpluses, especially China, for necessary adjustments to occur".
In an annex to the communiqu focusing on repairing global imbalances between countries that run relatively huge trade deficits and others that have large surpluses, the G7 also said greater flexibility in China's renminbi was needed to allow "necessary appreciations".
But Chinese finance officials told their G8 counterparts in a dinner after the meeting that it would take time for Beijing to act, a Japanese finance ministry official revealed. "There was not much change in China's stance in that they said it would not be easy to move quickly on currency reform after changing its regime last year," the Japanese official said. "But they said the direction would be towards flexibility," he added. The discussions follow a sharp decline in the value of the dollar last week.
The communiqu was also relatively positive about world growth and inflation. It said: "The strong global economic expansion continues into its fourth year and the outlook remains favourable, supported by improved macroeconomic policies in many countries as well as benign financial market conditions. Inflation remains contained despite high oil prices and global trade growth is buoyant."
The G8 also urged "investment in exploration, production, energy infrastructure and refinery capacity". Describing this necessary investment as crucial, the group said oil producing countries should provide "open and secure investment environments".
Fatih Birol, the International Energy Agency's chief economist, said on Saturday that $300bn (168bn, E243bn) a year in "upstream" investments is needed over the next decade to offset decreases in oil and natural gas production from aging fields and to meet future global energy demand.
Member states of the World Trade Organisation also decided not to hold a meeting of their trade ministers in Geneva at the end of the month, as they have not reached a consensus on reducing customs duties, diplomatic sources said on Saturday.
The EU and US blame each other for last week's collapse in trade talks, which mean there is no chance of a deal being reached on farm and industrial goods by the April deadline.
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