Speaking shortly before the start of a two-day meeting of finance ministers and central bankers, Chinese Finance Minister Xie Xuren also said the G20 should use trade figures rather than current account balances to assess economic distortions. China’s trade surplus has diminished of late.
G20 countries, which together account for 85 percent of world economic output, are trying to agree on a set of measurements as a basis for economic policy guidelines to avoid a repeat of the 2008 global financial crisis.
“We think it is not appropriate to use real effective exchange rates and reserves,” Xie said at a meeting with Russian, Brazilian and Indian counterparts.
The hard-line Chinese stance highlighted splits over how to define economic imbalances and prescribe action to remedy distortions, although negotiators said several compromise proposals were under discussion.
French President Nicolas Sarkozy, who holds the G20 presidency this year, urged ministers not to get sidetracked by the indicators dispute, and welcomed the fact that China had agreed to host a G20 seminar on reforming the international monetary system in Shenzhen in late March.
“I want to avoid your debates getting bogged down in interminable discussion about these indicators, which are distracting us from the essentials,” Sarkozy said in a speech.
The European Union’s economic affairs commissioner, Olli Rehn, said the right indicators to tackle global imbalances included the current account, the real effective exchange rate and currency reserves as well as public and private debt. “Especially, the current account account and the real effective exchange rate are essential,” Rehn told reporters.
Canadian Finance Minister Jim Flaherty said there was consensus on two indicators measuring public and private debt and negotiations were continuing on other measurements.
But even if the yardsticks are agreed, there is no sign of numerical targets even being broached.
Sarkozy told the ministers that economic policy coordination was the only way forward. “Giving priority to national interests would be the death of the G20,” he said.
Differences over the causes of and cures for global economic imbalances were also on display at a public debate among the world’s top central bankers on Friday.
Bank of England Gov. Mervyn King, reflecting the view of many Western policymakers, said the world risked protectionism or another financial crisis if policymakers failed to reduce currency distortions and other imbalances.
Chinese central bank governor Zhou Xiaochuan said Beijing would decide the pace of the appreciation of the yuan and would not be swayed by pressure from other countries.
Behind closed doors, senior officials wrangled over possible compromises to solve the indicators conundrum.
A European source said one possibility was to list several indicators — current accounts, exchange rates, currency reserves, public debt and deficits, and private savings — while making clear the prime focus would be on current accounts.
