G-20 vows to address global imbalances, eyes progress in 2011+

SEOUL, Nov. 12 Kyodo -
Leaders of the Group of 20 major economies on Friday vowed to address
imbalances in the world economy to ensure sustainable growth, eyeing progress
in development of so-called indicative guidelines to tackle the issue ''in the
first half of 2011.''
The leaders called for vigilance against volatility in currency movements and
indirectly urged China to let the yuan appreciate, committing to move toward
''more market determined exchange rate systems, enhancing exchange rate
flexibility to reflect underlying economic fundamentals, and refraining from
competitive devaluation of currencies.''
The leaders urged a ''Framework Working Group,'' with technical support from
the International Monetary Fund and other international organizations, ''to
develop these indicative guidelines, with progress to be discussed by our
finance ministers and central bank governors in the first half of 2011,'' they
said in a leaders' declaration issued after a two-day meeting in Seoul.
Using the guidelines, the first assessment on countries with excessive
imbalances ''will be initiated and undertaken in due course under the French
presidency'' of the G-20 next year, the declaration said.
Global imbalances are most symbolically represented by the huge U.S. trade and
current account deficit versus China's large surplus and dollar reserves.
Washington has been prodding Beijing to raise the value of the yuan to help
address such imbalances.
South Korean President Lee Myung Bak, who chaired the Seoul gathering, said the
G-20 will finalize the issue by the next G-20 summit in France in November next
year, hailing that the group has made ''tremendous progress.''
If the G-20 implements the plan as agreed, it will significantly help prevent a
global economic crisis in the future, Lee told a post-summit news conference.
The indicative guidelines ''composed of a range of indicators would serve as a
mechanism to facilitate timely identification of large imbalances that require
preventive and corrective actions to be taken,'' according to the declaration.
Backed by South Korea, the United States initially proposed that the level of
current account surpluses and deficits held by economies be limited to 4
percent of gross domestic product by 2015, in an apparent attempt to target
China and other countries with large current account surpluses.
Japanese Prime Minister Naoto Kan stressed that correcting global imbalances is
vital for sustainable growth in the world economy.
''We need to strengthen cooperation to move to a foreign exchange system better
determined by markets, avoid competitive currency devaluation and stabilize
currencies led by developed countries, including those with reserve
currencies,'' Kan told his G-20 peers at a working dinner Thursday.
Economists urged both surplus countries, such as China, and indebted nations,
including the United States, to take ''specific action'' to address the
imbalances.
''The trade imbalances between the two countries (China and the United States)
will be hard to resolve merely through currency revaluations,'' said Kim Tae
Joon, president of the Korea Institute of Finance in Seoul.
''To bring down their imbalances, such revaluations must be accompanied by
structural adjustments, namely China must stimulate domestic demand and the
U.S. must rein in its overall spending,'' Kim said in a commentary carried in
the Wednesday issue of the Korea Times newspaper.
At the Seoul summit, the G-20 leaders urged the United States and other
developed economies to be ''vigilant against excess volatility and disorderly
movements in exchange rates,'' which they believe ''will help mitigate the risk
of excessive volatility in capital flows facing some emerging countries.''
China and some other members have criticized the U.S. Federal Reserve's $600
billion government bond purchase scheme, saying it would weaken the U.S. dollar
and increase capital flows into higher-yield emerging economies, potentially
incurring inflationary pressure and creating asset-inflated bubbles there.
The G-20 leaders agreed to strengthen global financial safety nets, which help
countries cope with financial volatility and overcome sudden reversals of
international capital flows, according to the declaration.
The leaders hailed a decision by the IMF executive board to transfer more than
6 percent of voting power to under-represented emerging nations from developed
countries, a symbolic move to reform the structure and governance of the
Washington-based institution.
The reform ''will enhance the IMF's legitimacy, credibility and effectiveness,
making it an even stronger institution for promoting global financial stability
and growth,'' the declaration said.
Under the plan, China's voting share will be raised to third from sixth, after
the United States and Japan, exceeding that of key European countries such as
Germany and France.
Representing about 80 percent of the world's GDP, the G-20 groups Argentina,
Australia, Brazil, Britain, Canada, China, France, Germany, India, Indonesia,
Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey,
the United States and the European Union.
==Kyodo
2010-11-12 23:48:43


Dele