China tees up G20 showdown with US
By Alan Beattie in Washington, Geoff Dyer in Beijing, Chris Giles in London
Published: November 5 2010 06:56 | Last updated: November 5 2010 19:03
Cui Tiankai, a deputy foreign minister and one of China’s lead negotiators at the G20, said on Friday that the US plan for limiting current account surpluses and deficits to 4 per cent of gross domestic product harked back “to the days of planned economies”.
“We believe a discussion about a current account target misses the whole point,” he added, in the first official comment by a senior Chinese official on the subject. “If you look at the global economy, there are many issues that merit more attention – for example, the question of quantitative easing.”
China’s opposition to the proposal, which had made some progress at a G20 finance ministers’ meeting last month, came amid a continuing rumble of protest from around the world at the US Federal Reserve’s plan to pump an extra $600bn into financial markets.
Officials from China, Germany and South Africa on Friday added their voices to a chorus of complaint that the Fed’s return to so-called quantitative easing would create instability and worsen imbalances by triggering surges of capital into other currencies.
Tim Geithner, the US Treasury secretary, has proposed using what the US refers to as current account “guidelines” to accelerate global rebalancing, partly as a way of changing the debate away from simply pressing China to allow faster appreciation in the renminbi.
But on Thursday and Friday, governments focused instead on the global impact of the Fed’s action. “With all due respect, US policy is clueless,” Wolfgang Schäuble, German finance minister, told reporters. “It’s not that the Americans haven’t pumped enough liquidity into the market,” he said. “Now to say let’s pump more into the market is not going to solve their problems.”
Pravin Gordhan, finance minister of South Africa, a key member of the emerging market bloc, said the decision “undermines the spirit of multilateral co-operation that G20 leaders have fought so hard to maintain during the current crisis”, and ran counter to the pledge made by G20 finance ministers to refrain from uncoordinated responses.
The US Treasury declined to comment on Friday.
Experts say the mood has soured since the G20 Toronto summit in June and worry that unless the summit can patch up differences on trade imbalances and exchange rates, the outlook for international economic agreement is poor.
Ousmène Mandeng of Ashmore Investment Management and a former senior International Monetary Fund official, said: “The G20 will also have to show [in Seoul] it can work on the issue or its very existence will be in question.”
In recent weeks, there had been some hints that China was favourable to the idea of current account targets. Yi Gang, a deputy central bank governor, said China aimed to reduce its surplus to 4 per cent of GDP in the medium-term
But Mr Cui’s comments suggest that China’s senior leaders have decided to reject Mr Geithner’s proposal. “We believe it would not be a good approach to single out this issue and focus all attention on it,” he said.
Separately, the deputy foreign minister also had a stern message for European leaders, warning them not to attend next month’s Nobel Peace Prize ceremony for Liu Xiaobo, an imprisoned Chinese democracy activist.