G7 presses for stronger yuan
Written on October 5, 2009
The Group of Seven rich nations urged China on Saturday to strengthen the yuan, but gave no sign of how it might overcome Chinese resistance to that suggestion or resolve other tensions over global currency rates.
The G7 dominated economic policymaking for two decades, but Saturday’s meeting underlined that it could no longer solve global problems without the cooperation of fast-growing economies in the developing world such as China.
G7 finance ministers and central bankers, in a statement after they met in Istanbul, said Beijing should boost its tightly controlled currency to help correct imbalances in global trade, which have been blamed for fuelling the financial crisis.
“We welcome China’s continued commitment to move to a more flexible exchange rate, which should lead to continued appreciation of the Renminbi in effective terms and help promote more balanced growth in China and in the world economy,” the G7 said.
But China, while insisting it intends eventually to free up the yuan, has kept the currency essentially flat against the dollar since the global financial crisis began worsening in July 2008. The G7 statement’s wording on currency rates was identical to language used when the group last met six months ago.
China showed no sign on Saturday of heeding the G7’s pressure.
“Our exchange rate policy is very clear,” Yi Gang, a Chinese central bank vice governor who was in Istanbul for meetings of the International Monetary Fund, told Reuters. He said the policy would continue to emphasize stability online cash advance.
Asked whether China had been facing more pressure from other countries to let the yuan appreciate, he said: “We will continue our policy setting.”
The G7 also gave no sign of breaking new ground in resolving tensions among its members over weakness of the dollar, which has depreciated about 12 percent against a trade-weighted basket since March.
France and Canada have expressed concern in recent weeks that a weak dollar could hurt their exports. A G7 official, who declined to be named, said there was heated discussion of this issue in Istanbul.
But Saturday’s G7 statement offered nothing new to allay concern over dollar weakness, merely repeating language used six months ago, that too much volatility in exchange rates tended to threaten economic stability.
DECLINING POWER
The G7, comprising Britain, Canada, France, Germany, Italy, Japan and the United States, has been eclipsed during the financial crisis by the larger Group of 20, which includes rising powers such as China and India.
Meeting in Pittsburgh last month, leaders of the G20 agreed in principle to work toward cutting global imbalances and to tighten financial regulation.
“The G7 is not quite dead, but it is losing its relevance,” the IMF’s managing director, Dominique Strauss-Kahn, was quoted as saying by Emerging Markets magazine. “It’s on its way to extinction.”
Filed in: economics.