G20 drops China-sensitive plaudits on yuan reform
TORONTO (Reuters) - World leaders ditched plans to welcome Beijing's shift toward greater exchange rate flexibility at a G20 summit in Toronto on Sunday, highlighting China's sensitivity over the issue.
But President Barack Obama, who has been pressing for a yuan revaluation to help ease trade disparities, welcomed Beijing's move and said he believed over time the currency would appreciate significantly.
Negotiators had hoped a statement to be signed by the leaders in Canada would include a line welcoming last week's announcement that Beijing was ending a de facto peg that had locked the yuan to the U.S. dollar for nearly two years.
"The majority of the members of the G20 welcomed the plans of the government of China on introducing a floating yuan rate," Andrei Bokarev, a Russian finance ministry official, told reporters.
But a phrase saying as much was included in an early draft communique but dropped from the final version "at the request of the Chinese side," he said.
Two officials said the line that had been present on Saturday had been erased less than 24 hours later. "China did not want to be explicitly mentioned, even as a good case," one of the officials said.
Chinese officials say discussion of its currency has no place in international forums and President Hu Jintao made no mention of currency policy in a speech to G20 leaders on Sunday.
Instead, he said China recognized it had a critical role to play in helping to rebalance the global economy but necessary changes could not happen overnight.
Many economists argue that the yuan is undervalued by about 20 percent versus the dollar and that a more realistic valuation is vital to help balance the world economy.
U.S.-CHINA CONTENTION
It has become a major point of contention between Washington and Beijing. U.S. Congress members are pressuring Obama to get tougher with China, saying the mismatch in trade is making bad U.S. jobless rates even worse.
Obama said he believed China's pledge of greater currency flexibility is serious. "We didn't expect a 20 percent revaluation in a week. That would be disruptive to the Chinese economy. It would be disruptive to the world economy," he said.
"We do expect that as more and more market forces come to bear, that given the enormous surpluses that China has accumulated, that the RMB is going to go up, and it is going to go up significantly," he said. The yuan is also called the RMB or renminbi.
Chinese officials present in Toronto said it was fair for the G20 to discuss currency issues as a part of a broader consultation about economic policies. But they insisted that Beijing alone would determine yuan policy and argued that it was not the only important part of economic restructuring.
"If you only rely on exchange rate reform, it is very difficult to address trade imbalances or trade frictions," Yu Jianhua, a director-general in the commerce ministry, said.
U.S.-CHINA TRADE DISPUTE
In a separate but related development, China's ambassador to the World Trade Organization in Geneva told Reuters on Sunday that excessive demands from the United States explained why the Doha round of talks on global trade liberalization, launched in 2001, were going nowhere.
"The U.S. is the sole member who insists that we're still far away from the conclusion of the round," Sun Zhenzyu said.
"Their new excessive request on an elevated level of ambition is in fact equivalent to a restart of the round and a flagrant deviation from the original negotiation mandates."
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