French President Nicolas Sarkozy talks with German Chancellor Angela Merkel (2ndL), US President Barack Obama (2ndR) and British Prime Minister David Cameron prior to the start of a round-table meeting on Thursday during the G20 Summit of Heads of State and Government in Cannes, France. Photo: AFP
China rejected calls to appreciate its currency as the world's leading economies failed to agree on how to support the International Monetary Fund (IMF) to help tackle the European debt crisis at the G20 summit in Cannes Friday.
As the summit wrapped up, Chinese President Hu Jintao called on global leaders to stop pushing for currency appreciation in emerging markets, the Wall Street Journal reported.
"To keep asking emerging markets to revalue their currencies and reduce exports will not lead to balanced growth. On the contrary, it would only plunge the global economy into a ‘balanced recession,' and make sustainable growth impossible," Hu was quoted as saying.
Zhou Shijian, international trade law expert at the Center for US-China Relations Tsinghua University, cheered Hu's remarks.
"The confident remarks have solid foundation. It's groundless for some countries who always find fault in Chinese currency valuation," Zhou told the Global Times. He said the Jamaica Agreement signed by IMF members in 1976 ratified a country with a managed floating rate system, which has been adopted by most countries now, including China.
"In contrast, some western countries such as the US manipulate currency and fail to share its responsibilities as a financial giant," Zhou said. He argues the US has employed a quantitative easing currency policy and printed banknotes, which has led to the dollar's devaluation.
Hu's words echoed those made by Chinese commerce minister Chen Deming Thursday. China's yuan has appreciated to a reasonable level since it launched a reform of the exchange rate scheme, Chen told G20 leaders. The yuan has gained 30 percent against the dollar since 2005, while the trade surplus to GDP ratio has seen continued declines during the same period, Chen said.
According to the China Foreign Exchange Trade System, the Chinese currency renminbi, or the yuan, strengthened 33 basis points to 6.3165 against the US dollar on Friday, a new record high since it loosened its peg against the dollar in 2005.
Two economists, Edward C. Prescott from the US and Finn E. Kydland from Norway, who shared the 2004 Nobel Prize in economic science, told the Xinhua News Agency Friday the renminbi's fate is up to China.
"In the US, some said China's development hurts the US. Such a view is not right," said Prescott, who is attending the ongoing Conference on International Exchange of Professionals held in Shenzhen, South China's Guangdong Province.
On the sidelines of the summit Thursday, President Hu also met with US President Barack Obama and Russian president Dmitry Medvedev.
G20 leaders failed to agree on how to reinforce the IMF, though they agreed that its resources should be boosted to help tackle the European debt crisis, Xinhua reported, quoting European Union (EU) President Herman Van Rompuy.
"We wanted more lending capacity, more resources available for the International Monetary Fund," Van Rompuy told a news conference Friday.
German Chancellor Angela Merkel said no countries outside the eurozone had committed any money to the region's bailout fund, AP reported.
"We have different options…One of the options is to set up… some kind of trust fund, enhancing the resources of the IMF," Van Rompuy said, adding that the boost would not only benefit Europe, but also the world.
He also said the EU will keep its commitments to support Greece to stay afloat in the debt crisis.
Greece's leader announced a referendum on the eurozone bailout, but withdrew the plan Thursday following pressure from other EU members.
Separately, Italy has asked the IMF to scrutinize its budgetary reforms and quarterly reports on its reforms.
Zhou said the settlement of European problems depends on the continent itself. "In past decades, these countries have adopted high salaries and spending among their people. But the excessive consumption comes from loans. As the debt accumulated they discovered now that they are not able to make ends meet," Zhou said, adding that to cut salaries and social services, and prolong retirement age is the only way out.
In a speech made Thursday evening, China's President called for reform of the global economic governance.
"The international financial crisis has highlighted the deficiencies in the global economic governance system," said Hu. He said major efforts should be made to reform and improve the international monetary system, international trading system and commodity pricing mechanism.
He asked for continued reform of the International Monetary Fund, calling for the expansion of the use of special drawing rights, reform of the IMF currency basket and the buildup of a new international reserve currency system.
In addition, Hu also asked G20 countries to help developing economies grow and increase their voice in global economic governance.
"For years, there has been an imbalance between developed and developing countries in terms of access to resources, wealth distribution and development opportunities," he said. Hu said the imbalance has created a vicious circle where underdevelopment leads to backwardness and backwardness hinders development, thus hampering sustained and steady growth of the global economy.
According to Hu, China will also give zero-tariff treatment to 97 percent of tariff items of exports to China from the least developed countries that have diplomatic relations with China, and China's total imports in the coming five years are expected to exceed $8 trillion.
Agencies contributed to this story