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175840
Sun, 04/17/2011 - 04:25
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G-20 countries agree on in-depth assessment of global imbalances: communique
Hwang Doo-hyong
WASHINGTON (Yonhap) - The group of 20 major economies Saturday agreed to conduct an in-depth assessment of the global imbalances for the coming months so they could adjust them for balanced global economic recovery from the worst recession in decades.
"In order to enhance our mutual assessment process to promote external sustainability, we agreed on a set of indicative guidelines that complete the first step of our work to address persistently large imbalances," G-20 finance ministers and central bank heads said in a joint communique after a two-day meeting here Saturday. "We now launch the second step of this process with an in-depth assessment of the nature of these imbalances and the root causes of impediments to adjustment."
The G-20 officials were following up on the agreement by their leaders in Seoul in November to create "indicative guidelines" to address trade imbalances during the first half of this year, as advanced and developing nations still blame each other for the protracted economic recovery.
The United States and European Union have stepped up pressure on China to appreciate the yuan, blaming the undervalued Chinese currency for the burgeoning trade deficit and job cuts in the U.S. and Europe.
China, Brazil and some other emerging economies say the loose monetary policy and burgeoning budget deficits in the U.S. and advanced European economies are causing excessive capital overflows and inflationary pressures in developing economies.
The U.S. budget deficit is expected to surpass the US$14.3 trillion borrowing ceiling next month, and the federal government may have to shut down by then unless Congress raises the borrowing limit. The U.S. deficit is likely to reach $1.4 trillion for this year alone.
U.S. President Barack Obama has announced his plans to reduce the deficit by $4 trillion in 12 years on military and domestic spending cuts, tax increases for the wealthy and health care overhaul, but Congressional Republicans call for more than $6 trillion in cuts within a decade.
Brazil and some other developing economies have taken measures to restrict the inflow of foreign capital seeking short-term gains, complaining that excessive inflow of foreign currency inflates the prices of commodities, stocks and currency to create asset bubbles.
The U.S. agreed to the indicative guidelines in Seoul as China and several other countries strongly opposed Washington's push for limiting current account deficits and surpluses to less than four percent of gross domestic products of the G-20 member states, which account for 85 percent of the global economy.
"To strengthen the international monetary system, we agreed to focus our work, in the short term, on assessing developments in global liquidity, a country specific analysis regarding drivers of reserve accumulation, a strengthened coordination to avoid disorderly movements and persistent exchange rates misalignments, a criteria-based path to broaden the composition of the SDR, an improved toolkit to strengthen the global financial safety nets, enhanced cooperation between the IMF and regional financial arrangements, the development of local capital markets and domestic currency borrowing, coherent conclusions for the management of capital flows drawing on country experiences," the G-20 officials said in the communique.
China's foreign exchange reserves surpassed US$3 trillion last month amid growing concerns of inflation in the world's second biggest economy.
The International Monetary Fund early this week warned against overheating of China, India and some fast developing economies amid concerns of China and some other developing economies hoarding raw materials driving up commodity prices in the international markets.
Oil and other commodity prices have already risen substantially in recent months due to uncertainties in North Africa and the Middle East engulfed in a series of popular uprisings in the region, the major source of oil.
"Commodity prices face increasing pressures," the communique said. "We welcomed the work of international organizations on their report to address excessive price volatility in food and agricultural markets, and its impact on food security. We look forward to receiving their final recommendations, including on risk management and mitigation tools."
The communique also stressed "the need for participants on commodity derivatives markets to be subject to appropriate regulation and supervision, called for enhanced transparency in both cash and derivatives markets" by September and "to address market abuses and manipulation."
South Korean Finance Minister Yoon Jeun-hyun said Friday, "China and other developing economies share the understanding that unless we can stabilize commodity prices, we will have limitations in the global economic recovery.
"The biggest problem is the skyrocketing prices of commodities in the international market," he said. "We need to join forces to stabilize commodity prices as the whole nation is suffering from the ailment of inflationary pressure."
The IMF forecast in its quarterly World Economic Outlook report Monday that South Korea's economy will pick up 4.5 percent this year on a 4.5 percent price hike rate, while estimating China inflation at 5.0 percent on a 9.6 percent growth this year.
The lending agency also said the currencies of South Korea and China are still undervalued.
"The currency of China still appears substantially weaker than warranted by medium-term fundamentals; the Korean won, which depreciated by some 25 percent during the crisis, is also weaker than warranted," it said.
WASHINGTON (Yonhap) - The group of 20 major economies Saturday agreed to conduct an in-depth assessment of the global imbalances for the coming months so they could adjust them for balanced global economic recovery from the worst recession in decades.
"In order to enhance our mutual assessment process to promote external sustainability, we agreed on a set of indicative guidelines that complete the first step of our work to address persistently large imbalances," G-20 finance ministers and central bank heads said in a joint communique after a two-day meeting here Saturday. "We now launch the second step of this process with an in-depth assessment of the nature of these imbalances and the root causes of impediments to adjustment."
The G-20 officials were following up on the agreement by their leaders in Seoul in November to create "indicative guidelines" to address trade imbalances during the first half of this year, as advanced and developing nations still blame each other for the protracted economic recovery.
The United States and European Union have stepped up pressure on China to appreciate the yuan, blaming the undervalued Chinese currency for the burgeoning trade deficit and job cuts in the U.S. and Europe.
China, Brazil and some other emerging economies say the loose monetary policy and burgeoning budget deficits in the U.S. and advanced European economies are causing excessive capital overflows and inflationary pressures in developing economies.
The U.S. budget deficit is expected to surpass the US$14.3 trillion borrowing ceiling next month, and the federal government may have to shut down by then unless Congress raises the borrowing limit. The U.S. deficit is likely to reach $1.4 trillion for this year alone.
U.S. President Barack Obama has announced his plans to reduce the deficit by $4 trillion in 12 years on military and domestic spending cuts, tax increases for the wealthy and health care overhaul, but Congressional Republicans call for more than $6 trillion in cuts within a decade.
Brazil and some other developing economies have taken measures to restrict the inflow of foreign capital seeking short-term gains, complaining that excessive inflow of foreign currency inflates the prices of commodities, stocks and currency to create asset bubbles.
The U.S. agreed to the indicative guidelines in Seoul as China and several other countries strongly opposed Washington's push for limiting current account deficits and surpluses to less than four percent of gross domestic products of the G-20 member states, which account for 85 percent of the global economy.
"To strengthen the international monetary system, we agreed to focus our work, in the short term, on assessing developments in global liquidity, a country specific analysis regarding drivers of reserve accumulation, a strengthened coordination to avoid disorderly movements and persistent exchange rates misalignments, a criteria-based path to broaden the composition of the SDR, an improved toolkit to strengthen the global financial safety nets, enhanced cooperation between the IMF and regional financial arrangements, the development of local capital markets and domestic currency borrowing, coherent conclusions for the management of capital flows drawing on country experiences," the G-20 officials said in the communique.
China's foreign exchange reserves surpassed US$3 trillion last month amid growing concerns of inflation in the world's second biggest economy.
The International Monetary Fund early this week warned against overheating of China, India and some fast developing economies amid concerns of China and some other developing economies hoarding raw materials driving up commodity prices in the international markets.
Oil and other commodity prices have already risen substantially in recent months due to uncertainties in North Africa and the Middle East engulfed in a series of popular uprisings in the region, the major source of oil.
"Commodity prices face increasing pressures," the communique said. "We welcomed the work of international organizations on their report to address excessive price volatility in food and agricultural markets, and its impact on food security. We look forward to receiving their final recommendations, including on risk management and mitigation tools."
The communique also stressed "the need for participants on commodity derivatives markets to be subject to appropriate regulation and supervision, called for enhanced transparency in both cash and derivatives markets" by September and "to address market abuses and manipulation."
South Korean Finance Minister Yoon Jeun-hyun said Friday, "China and other developing economies share the understanding that unless we can stabilize commodity prices, we will have limitations in the global economic recovery.
"The biggest problem is the skyrocketing prices of commodities in the international market," he said. "We need to join forces to stabilize commodity prices as the whole nation is suffering from the ailment of inflationary pressure."
The IMF forecast in its quarterly World Economic Outlook report Monday that South Korea's economy will pick up 4.5 percent this year on a 4.5 percent price hike rate, while estimating China inflation at 5.0 percent on a 9.6 percent growth this year.
The lending agency also said the currencies of South Korea and China are still undervalued.
"The currency of China still appears substantially weaker than warranted by medium-term fundamentals; the Korean won, which depreciated by some 25 percent during the crisis, is also weaker than warranted," it said.
