Post date: Feb 19, 2011 7:46:17 PM
Finance ministers of the world's major economies reached a fudged accord on Saturday (February 19) on how to measure global economic imbalances after China prevented the use of exchange rates and currency reserves as indicators. US Treasury Secretary Geithner nevertheless praised the accord as historic.
PARIS, FRANCE (FEBRUARY 19, 2011) REUTERS - Finance ministers of the world's major economies reached a fudged accord on Saturday (February 19) on how to measure global economic imbalances after China prevented the use of exchange rates and currency reserves as indicators.
Ministers and central bank governors agreed on a list of indicators including public debts and fiscal deficits, private savings and private debt, the trade balance and other components of the balance of payments such as net investment flows.But at Chinese insistence there was no mention of the real effective exchange rate or foreign currency reserves.
The United States and other western countries accuse China of keeping the yuan artificially undervalued to boost its exports and accumulate massive foreign currency reserves that they say distort the world economy.
U.S. Treasury Secretary Timothy Geithner repeated after the talks that China's currency "remains substantially undervalued" and its real exchange rate had not moved much despite its slow appreciation since a reform last June.
We need a stronger consensus on policy measures that can help emerging market economies manage the risks that come with large flows of capital and finally a more stable international monetary system of course requires stronger oversight of the major global financial institutions and financial markets. We've agreed to impose tougher restraints on risk taking and leverage to bring oversight to the derivatives markets and to improve our capacity to contain the damage that can be caused by the failure of large financial institutions. This is a very complicated undertaking and we need to be very careful to make sure we create a level playing field across countries so that financial activity does not migrate to jurisdictions where standards are weaker or less vigourously enforced," he said.
The world's number two economy, which overtook Japan this week, has resisted Western pressure to substantially revalue its currency to help rebalance global growth.
Geithner offered reassuring words about the U.S. economy, saying that growth was "gathering momentum" and said European leaders had told G20 peers that they would ensure that struggling euro zone nations and their banks would have access to financing.
China is now the world's second largest economy, but still a fast-growing emerging market and Geithner said stronger standards for appropriate foreign exchange policies would "help accommodate the changes in economic forces ahead".
The G20 communiqué said ministers agreed to work on strengthening the international monetary system to help avoid disruptive fluctuations in capital flows and disorderly movements in exchange rates.