China scorns US plan for G20

2010-11-06 13:22

China reacted strongly against US policies on Friday before the G20 summit, ridiculing Washington’s plan to impose current account targets and warning of risks in the US Federal Reserve’s monetary ­easing.

The remarks by Cui Tiankai, China’s deputy foreign minister, marked the first high-level official stance from Beijing on the issue.

“We believe a discussion about a current account target misses the whole point. If you look at the global economy, there are many ­issues that merit more attention. For example, the question of ­quantitative easing,” Cui said.

The US proposed at the G20 ­finance ministers’ meeting last month that countries should cap current account surpluses or ­deficits at 4% of gross domestic product as part of efforts to ­rebalance the global economy.

The idea of numeric targeting met strong resistance from Japan and Germany, although some ­Chinese advisers had said ­Beijing might be able to see eye to eye with Washington. Cui put such suggestions to rest, however.

“Of course, we hope to see more balanced current accounts,” Cui said, “but we believe it will not be a good approach to single out this issue and focus all attention on it. The artificial setting of a numerical target cannot but remind us of the days of planned economies.”

In a briefing on China’s outlook for the G20 summit in Seoul on Thursday and Friday, Cui rejected attempts by other countries to set targets for yuan appreciation.

“That would indeed be asking us to manipulate the renminbi’s ­(yuan’s) exchange rate, and it is something that we will of course not do,” he said.

China has resisted calls from other nations to let market forces set the value of the yuan.

The US in particular has said that China is keeping its currency ­artificially cheap, giving its ­exporters an unfair advantage.

Beijing has repeatedly insisted that it alone will decide how to ­reform its currency.

China’s President Hu Jintao kicked off a two-nation European visit on Thursday.

He hopes to ease strains with the European Union (EU) ahead of the upcoming G20 summit after European leaders closed ranks with Washington by urging China to allow its currency to rise more quickly.

Cui said China would closely monitor the effect of the Fed’s plan – which was announced this week – to buy $600 billion (about R4 trillion) of US government bonds to stimulate the economy.

“They owe us some explanation,” he said. “I have seen much ­concern about the impact of this policy on financial stability in ­other countries. As the main ­issuer of a reserve currency, we would hope that the US adopts a responsible position.”

Meanwhile, Beijing would keep the door open for discussions with Washington, Cui said, adding that he was confident the relationship between the world’s two largest economies would remain healthy.

Emerging market economies said the Fed’s move made a substantive deal on cutting global economic imbalance less likely to be reached at the G20 meeting in Seoul.

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