Geithner keeps pressure on China after G20 finance meeting
US Treasury Secretary Timothy Geithner is keeping the pressure on China, after finance ministers meeting in South Korea this weekend seem to have staved off the immediate threat of a 'currency war.'
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The purpose of that proposal was to restrain China, whose current accounts surplus is nearly 5 percent of its GDP, and Germany, with a surplus of approximately 6 percent, from overwhelming markets with exports while taking far fewer imports. The US by contrast is running a current accounts deficit of 3.2 percent, third highest among G20 nations after Turkey and South Africa.Skip to next paragraph
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... but showed no signs of defeat
Geithner showed no sign of defeat, or even disappointment.
“We found agreement that we have to set thresholds," he told reporters here. “We found a lot of support.”
His concern about China was clear, however.
“[Those countries] that have traditionally run large trade and current account surpluses [must get away] from export dependence [and move] toward stronger domestic demand-led growth,” he said, meaning that countries like China should focus on selling their products at home rather than abroad.
'Currency war' averted
Negotiations here at least seem to have staved off the immediate threat of a “currency war” – a term introduced last month by Brazil’s finance minister, Guido Mantega, who did not attend the meetings here.
The ministers seemed to have committed themselves to that much by promising to “pursue the full range of policies” for “reducing excessive imbalances.”
They also vowed to “resist all forms of protectionist measures” – widely viewed as a worst-case scenario in which countries place high tariffs and quotas on imports in order to keep them from competing with their own products.
Agreement on IMF influence
In the only really substantive agreement reached here, the ministers agreed on giving emerging market countries, notably China and India, far more influence over the International Monetary Fund.
The IMF in the last two years has vastly increased its power to assist countries on the brink of financial disaster but has been widely criticized for representing the views basically of established economies.
Under the deal reached here, Europe is giving up two seats on the 24-member board to emerging markets while raising the voting shares of emerging market countries by 6 percent. The United States still has the highest voting share, but China now has the third-highest voting share and India the eighth.
“The IMF is playing an increasing role of being an honest broker,” said Dominique Strauss-Kahn, the IMF managing director. “It’s a big day for Korea and a big day for the IMF. We don’t have a day like this every time” – an allusion to recent talks in Washington in which the IMF seemed mired in disagreements.