President urges G20 to defuse currency war
Advanced nations join hands against China
By Cho Jin-seo
GYEONGJU ― President Lee Myung-bak Friday asked finance ministers and central bank governors of G20 member nations to try their best and find solutions to the “currency war” and the revamping of the International Monetary Fund (IMF).
In his welcoming speech to the meeting that leads up to the G20 Seoul Summit, Lee said, “If you don’t produce a result in Gyeongju, I may ground all the planes and buses out of Gyeongju.”
Lee’s remarks were regarded as a veiled plea, reflecting an acute division in the extended grouping of strong economies, particularly the United States and other traditional wealthy countries against emerging economies in general and China in particular.
Lee pointed out that a failed G20 can backfire on the global economy, as it will affect investors’ confidence in financial markets.
“The G20 can inflict damage on the world economy, if its members show no interest in making consensus. I understand that each country has its own interest, but please produce solutions for the sake of the global economy,” he said.
Despite Lee’s plea, the situation appeared to be tense underneath greetings they exchanged at a brief reception at Gyeongju Hilton Hotel before the first session in the afternoon.
Korea’s Finance Minister Yoon Jeung-hyun welcomed Zhou Xiaochuan, the governor of the People’s Bank of China, saying “Ni Hao” _ “hello” in Chinese. Shin Je-yoon, deputy minister, also had a relatively long talk with Chinese officials, people with access to that meeting said.
However, the Yoon-Zhou meeting, originally scheduled for the morning, was canceled. According to Reuters, finance ministers of the G7 advanced countries also gathered to the exclusion of China and other emerging economies.
The absence of Brazil’s finance minister and central bank governor were the clearest signal that the country is feeling heat for the responsibility of sparking the debate over the rhetoric of a “currency war” and that the international politics regarding this matter is more complex than it seems.
Both Guido Mantega, the country’s finance minister, and Henrique de Campos Meirelles, the governor of its central bank, did not come to Seoul. Mantega was the first G20 finance minister to officially use the term “currency war” on Sept. 27 to complain about exchange rate of other countries.
Instead of coming to Seoul, he launched a long-range attack on the United States from Brazil, contrary to the common belief that he was with the American side in bashing China.
“For me, the most destabilizing the global exchange is the devaluation of the dollar, even more than the Chinese devaluation,” he said to local media Negocios on Thursday. Korean hosts said they did not know the real reason of his absence.
Brazil is one of two nations in Gyeongju to be represented by a vice finance minister, along with Indonesia. It was also the only country whose national leader, President Luiz Inacio Lula Da Silva, skipped June’s summit in Toronto.
Among other countries participating in the Gyeongju meeting, Japanese and Belgian finance ministers stressed the importance of “balanced” exchange rates again Friday morning.
Japan’s Finance Minister Yoshihiko Noda indirectly blamed China to reporters from Japan, The Associate Press reported. “Fundamentals should be reflected in the foreign exchange rate,” he said. “Excessive volatility in currency markets is harmful to the stability of the global economy and financial system.”
His remark was understood as blaming China, which has been accumulating a large trade surplus.
Didier Reynders, Belgium’s finance minister, also raised an insinuation on China.
“That means that exchange rates that are in line with the different positions of the world’s economies, it means strong currencies in strong economies, not weak currencies in strong economies,” he was quoted as saying by Bloomberg ahead of the ministerial meeting. “Balanced currencies should reflect the situation of global growth.”
On Saturday afternoon, the G20 ministers will announce a joint statement before the press on the development of global economic policy coordination. Many important decisions, such as the reform of the International Monetary Fund, are likely to remain unresolved until November’s summit in Seoul, its officials say.