China will not agree to false solutions
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China will not assent to the US proposal on setting a numerical target for current account balances, because such a measure may not resolve global economic imbalances and is unfair to emerging economies, Chinese officials said on Thursday on the sidelines of the G20 Seoul Summit.
When finance ministers of G20 nations met last month in the run-up to the summit, the US proposed capping the ratio of current account balances to 4 percent of a nation's gross domestic product, which was strongly opposed by both advanced and emerging nations.
At a media briefing held in Seoul, officials of the Chinese delegation expressed their opposition to a numerical target for current account balances, because they are, essentially, incapable of resolving global imbalances.
"As in the case of other emerging markets, China will not agree to a target that cannot solve global economic imbalances," said Chen Xu, director-general of the Ministry of Foreign Affairs' department of international organizations and conferences.
Chen said it is unrealistic to set a specific target, since there are wide divergences among the economies of the G20 member nations, as well as a wide range of sources to the global imbalances.
A target would also be unfair to developing and emerging economies if it was the result of a political demand by some developed nations, he added.
Zheng Xiaosong, director-general of the international department of the Ministry of Finance, agreed with Chen's comments.
"To resolve the global economic imbalances, we need to make joint efforts. Developed countries should particularly adopt responsible macroeconomic policies," Zheng said.
"The problem is a result of globalization, which is related to trade imbalances, capital flows as well as some improper policies adopted by the developed countries," he said.
Earlier this month, the US Federal Reserve Board announced it would print $600 billion in treasury bonds to rescue its ailing economy, known as quantitative easing. The measure sparked criticism across the world, especially from emerging markets, which are concerned it will have a spillover effect, drawing money inflows, pushing up the price of assets and the value of their currencies.
"When a reserve currency country adopts a policy, it should take into account not only its national economic interest, but also bear in mind its impact on the global economy," Zheng said.
Zhang Tao, head of the international department of the People's Bank of China, said the US policy will have a major impact on emerging market economies, including China, though the country has the capacity to absorb financial shocks triggered by massive capital inflows.
"We will use existing measures for capital inflow management and make flexible adjustments to make the policy better targeted and more flexible," he said.
Reducing the risk of a currency war is another major topic at the summit.
During a meeting with his US counterpart Barack Obama, President Hu Jintao said China's foreign exchange reform will be a gradual process. Hu also said China will remain unswerving over the yuan's reform.
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