Finance ministers from the G20 leading economies are meeting in Gyeongju, South Korea, ahead of a summit by heads of state and government next month.
The first day of a meeting of finance ministers and central bankers of the world’s 20 leading economies in South Korea on Friday brought little movement in the dispute over exchange rate policies.
The leaders were expected to seek ways to reduce recent tensions over currency disputes during the two—day meeting in the eastern coastal town of Kyongju, which comes three weeks before the Group of 20’s (G20’s) heads of state and government meet in Seoul.
The United States and other countries have accused Beijing of artificially keeping down the value of the yuan to the advantage of its exporters and the detriment of China’s competitors, including U.S. producers.
A draft for Saturday’s final communique said the G20 could agree to “refrain from competitive undervaluation” of their currencies and strive to move toward a more market—determined exchange—rate system, South Korea’s Yonhap news agency reported . Renewed conflict over the yuan could complicate the G20’s hopes of reaching an agreement next month on reforming the international financial system, including changing the voting weights in the International Monetary Fund (IMF) to give more representation to emerging economies like China.
However, no breakthrough was expected on the topic of IMF reforms in Kongju, despite calls by South Korean President Lee Myung Bak to settle the readjustment of IMF quotas at that meeting. A renewed push by U.S. Treasury Secretary Timothy Geithner for the G20 to fix rules on exchange rates and numerical targets of 4 per cent of a country’s gross domestic product for “sustainable” trade surpluses and deficits was met by resistance by other G20 members, among them Germany. German Economics Minister Rainer Bruederle stressed that his country’s trade surpluses were the results of the higher competitiveness of German companies and not exchange rate policies. Mr. Geithner had suggested that countries with large export surpluses should agree to boost domestic demand, for example by tax cuts, a move which would affect countries such as China, Japan or Germany. At the same time countries with persistent trade deficits, such as the U.S., were to boost exports and cut spending.