Beijing/Kyoto: China on Friday rebuffed a U.S. initiative to set targets for trade imbalances, setting the stage for what could be a testy summit of world leaders in Seoul next week.
Vice-Foreign Minister Cui Tiankai also rejected any attempt by other countries to set target ranges for the yuan, also known as the renminbi, to appreciate.
"That would indeed be asking us to manipulate the renminbi`s exchange rate, and it is something that we will of course not do," Cui told a news briefing.
Efforts to reduce imbalances that are destabilising the global economy will be high on the agenda of the Nov. 11-12 summit of the Group of 20 forum of leading economies in the South Korean capital.
"Of course, we hope to see more balanced current accounts," Cui, China`s chief G20 negotiator, said. "But we believe it would not be a good approach to single out this issue and focus all attention on it. The artificial setting of a numerical target cannot but remind us of the days of planned economies."
U.S. Treasury Secretary Timothy Geithner last month floated the idea of capping surpluses and deficits on the current account -- the broadest measure of trade in goods and services -- at four percent of gross domestic product.
German Economics Minister Rainer Bruederle also caustically dismissed the proposal at the time as smacking of old-style central planning.
The United States believes an undervalued yuan is a major cause of global imbalances and has been pressing Beijing, largely in vain, to let the currency rise more swiftly to reflect the strength of what is now the world`s second-largest economy.
But the waters of the debate have been muddied by the Federal Reserve`s decision on Wednesday to print money to buy $600 billion in long-term bonds in an effort to revive the flagging U.S. economy.
The policy is known in market jargon as quantitative easing (QE).
With U.S. interest rates likely to stay near zero for the foreseeable future, resentment is rumbling around the globe that the U.S. central bank`s initiative will generate even more instability by inflating asset bubbles and increasing inflation.
"QE creates excessive liquidity that flows over to countries like Brazil," Henrique Meirelles, the head of Brazil`s central bank, said in Chicago on Thursday.
"Definitely, for Brazil it does create a problem and Brazil will present proposals in that regard to several countries -- the U.S. and China -- to reach a different agreement not to generate so many distortions."
Bureau Report
