China vows to collar US over monetary policies

09:14, November 09, 2010      

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China yesterday urged the United States to "act responsibly" in its monetary policies, and said that concerns will be raised at the upcoming G20 summit in Seoul, South Korea.

Vice Minister of Finance Zhu Guangyao made the remarks at a press briefing on President Hu Jintao's attendance to the meeting.

The US Federal Reserve last week announced plans to purchase US$600 billion worth of government bonds in a bid to revive the sluggish economy.

The near-zero US interest rate and a weak dollar are expected to push liquidity into Asian countries, potentially destabilizing emerging economies.

Zhu urged the United States to "realize its responsibility and obligation as a major currency issuing country, and take responsible macroeconomic policies.

"We will have candid discussions with the US side. We hope its macroeconomic policy can be conducive to the development of the world economy, not the contrary," Zhu said.

This is the second round of such stimulus measures, after the Fed purchased US$1.7 trillion worth of mortgage-backed securities and treasury notes between December 2008 and March 2010 in a bid to keep the economy from plunging into another Great Depression.

"The current situation is totally different from the time of the first round. There's no shortage of funds in the financial market," Zhu said.

The meetings of G20 finance ministers and central bank governors over the weekend stressed that countries with systemic influence should pay attention to the "spillover effect" of their macroeconomic policy.

As the recovery of world economy is still unstable, a responsible macroeconomic policy will not only be good for the US, but also the world as a whole, Zhu said.

He added that China will hold talks with the US on the issue, as part of the dialogue on macroeconomic policies.

The G20 summit will be held from November 11 to 12 in Seoul.

Meanwhile, US Treasury Secretary Timothy Geithner yesterday said China is supportive of the G20's framework for rebalancing the global economy, and he expects broad consensus in Seoul.

Geithner is in India during a state visit with President Barack Obama.

"I'm very confident that you're going to see very strong consensus on this basic framework because it meets the basic tests and it's better than the alternatives," Geithner said. "The Chinese are very supportive of it. It has a lot of benefits to them."

Geithner reaffirmed a G20 plan to limit current account surpluses and deficits does not contain numerical targets, which he called economically unfeasible. Several countries had objected to suggestions that such imbalances be limited to around 4 percent of gross domestic product.

"What we have proposed is a framework which incorporates early warning indicators of large surpluses or deficits which can then be monitored," Geithner said.

He said limiting current account imbalances was needed to check excess volatility in financial markets and combat protectionist pressures, adding that exchange rates were a key part of the plan.

The US Treasury chief said China was at the early stages of reforming its currency, a move that was "overwhelmingly in its interests," as well as those of its trading partners.

Washington blames Beijing for holding down the yuan at a level it says is unfairly low. Geithner has delayed the delivery of a report on whether China manipulates its currency until after the G20 summit in Seoul.

"It's beginning to start to make the changes that will allow for broader convertibility over time, but those are in a very, very early stage," Geithner said of China.

source: Shanghai Daily

(Editor:黄蓓蓓)

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