The Group of 20 is debating whether to include a reference to China’s currency in a joint statement by leaders following their two-day summit in Cannes, France, according to an official from a G-20 nation.
A draft of the communique singled out China as needing to allow more flexibility in its currency to help ease global trade and investment imbalances, the official said on condition of anonymity because discussions on the statement haven’t finished. The official wasn’t convinced the citation will remain in the final version because of opposition from Chinese officials. The statement is scheduled for release tomorrow.
Any ratcheting up of pressure on yuan gains might risk stoking tension as European officials seek to persuade China to invest in an expanded rescue fund aimed at resolving the euro- region’s debt crisis. Chinese Deputy Finance Minister Zhu Guangyao last month welcomed a statement by G-20 finance chiefs that omitted reference to the yuan.
The Oct. 16 communique was “comprehensive and balanced,” Zhu said in an interview last month. The text said emerging markets with trade surpluses should continue to “move toward more market-determined exchange-rate systems and achieve greater exchange-rate flexibility to reflect economic fundamentals.”
U.S. policy makers have pressured China to allow faster gains in the yuan. Treasury Secretary Timothy F. Geithner said on Oct. 11 that the Chinese currency had appreciated 10 percent, adjusted for inflation, from mid-2010 through early October, a pace that’s too slow. Even so, the U.S. on Oct. 14 postponed a report on the exchange-rate policies of its trading partners, including China, until after the G-20 summit.
Canadian Finance Minister Jim Flaherty said in an interview after last month’s G-20 finance minister and central bank governor meeting that China’s reluctance to allow more flexibility in its currency has been a “persistent thorn.”
Chinese officials have said that the current priority is fixing Europe’s debt crisis. Zhu said yesterday in Cannes that the euro-region rescue fund is an “important tool” to address the sovereign-debt crisis. He also said it’s “too soon” for China to discuss further purchases of the fund’s bonds.
French President Nicolas Sarkozy, head of the G-20 this year, has advocated an increased international role for the Chinese currency, bringing it into the International Monetary Fund’s Special Drawing Rights system.
“France will try to make the most of the summit, outlining a plan to reduce dependency on the dollar and bring China into the SDR -- most likely by 2020,” Standard Chartered Plc foreign exchange analysts led by Callum Henderson in Singapore wrote in a note to clients today.
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