China: G-20 Should Focus on Recovery, Not Currency Fight

Seoul. The leaders of the world’s major economies sparred over global currencies on Wednesday ahead of the upcoming G-20 summit in Seoul, with China saying the summit should focus on the global economy, Japan urging South Korea to let its currency trade freely and the United States blaming China for recent capital controls in emerging economies.
Chinese Vice Foreign Minister Cui Tiankai said the G-20 summit should focus on the global recovery rather than currencies, as Beijing tries to defuse pressure to ease its exchange rate controls.

“If you do want to discuss currency issues then you have to focus on the major international reserve currencies first,’’ Cui said, referring to the dollar, euro and yen. Cui is a key Chinese official for G-20 affairs.

China has been under pressure for years to allow the yuan to strengthen substantially in line with its emergence as a top global economy.

Beijing denies that it manipulates the yuan and says it is allowing it to gradually strengthen in a way that will not harm the world economy.

US Treasury Secretary Timothy Geithner on Tuesday blamed China’s policy of limiting gains in the yuan for contributing to a round of capital controls and currency-market interventions by emerging economies.

“What’s happening is, as China holds its currency down, their currencies are moving up and they’re having to work very hard to make sure they’re not at an unfair disadvantage with China,” Geithner said.

“This issue, which people like to frame as uniquely an American preoccupation, is really much more important to the rest of the world and is really a global problem as a whole,” he said.

Currencies are in sharp focus as investors seeking a haven of high-growth amid miserably low returns in the developed world pour cash into Asian stocks and bonds, pushing many of the region’s currencies to export-bruising levels.

Meanwhile, Japanese Prime Minister Naoto Kan urged South Korea to stop preventing its exchange rate from appreciating and said competition with Japan’s rival in the technology and automobile industries is becoming a major issue.

“In many ways, competition is a significant topic for Japan’s relations” with South Korea, Kan said.

“Guiding one’s currency lower is against the overall coordination process. We’d like South Korea and China to take responsible actions according to the common rules.”

The comments underscore the Japanese government’s frustration with Asian nations devaluing their currencies to protect local exporters.

Japan’s own intervention in currency markets for the first time in six years last month to tame the yen’s advance to a 15-year high against the dollar brought about criticism from policymakers in Europe and politicians in the US.

South Korea is set to host the fifth G-20 summit next month in Seoul.

It will be the first hosted by a non-member of the traditional Group of Seven leading advanced nations and the first in Asia.