Speaking at the Boao business forum on the southern Chinese island of Hainan, Zuma said the global financial crisis had exposed the inadequacies and shortcomings of the international monetary system, which has the dollar at its core.
“In this regard, South Africa joins the call on major reserve currency-issuing economies to adopt responsible macroeconomic policies. They must take into account the ramifications of their monetary policies for both the domestic economy and the world economy,” he said.
Zuma did not refer specifically to the dollar. The euro zone, Britain and Japan, the guardians of the other main reserve currencies, have also adopted ultra-stimulative monetary stances to help their economies recover from the global financial meltdown.
But emerging markets have reserved particular ire for the US and its central bank.
They have repeatedly criticized the Federal Reserve’s current $600 billion bond-buying program for depressing the dollar and sending unwanted waves of footloose capital into their economies in search of higher returns, pushing up exchange rates and asset prices.
The dollar by some measures is trading at a record low against the currencies of America’s trading partners.
“We would like to caution ... that we need to remain vigilant to any significant moves toward trade protectionism and competitive devaluations of individual currencies,” Zuma said.
“If these occur, it will merely result in a race to the bottom and undermine all G20 efforts to achieve strong, sustainable and balanced growth,” he added.
Zuma was speaking hours after Brazilian Finance Minister Guido Mantega said rich countries were more to blame than China for imbalances in the world economy.
“The primary responsibility for the excess liquidity lies with the advanced nations, not emerging ones,” Mantega said in response to questions about China’s exchange rate, which many economists say is kept artificially weak by Beijing.
Mantega made his comments in Washington ahead of a meeting of finance ministers from the Group of 20 rich and developing nations. Brazil and South Africa are both G20 members, as is China.
G20 ministers will try yet again, after several fruitless attempts, to agree on a formula for identifying which countries have large external payments imbalances that are a risk to international financial stability.
Zuma’s stance will please his hosts.
China says its current account surplus is due not to an undervalued exchange rate but to deep-seated factors that generate a hefty domestic savings surplus.
Beijing rejected a proposal at a G20 meeting in February to include a country’s current account position and foreign exchange reserves total as indicators of an economy out of kilter.
China’s current account surplus, though large, is declining as a proportion of gross domestic product and the country ran its first quarterly trade deficit since 2004 in the first quarter.
But Beijing said on Thursday that its foreign exchange reserves, accumulated by the central bank through purchases to hold down the yuan’s exchange rate, now exceeded $3 trillion, by far the largest stockpile in the world.
