Finance ministers from the G-20 will work next year on a system to assess the path of global current-account imbalances, German Chancellor Angela Merkel told reporters in Seoul, where she attended a summit of the leaders of the world’s largest developed and emerging economies. The G-20 are scheduled to release a joint statement later today.
A U.S. government official said the meeting also produced a consensus that exchange-rate changes are to happen gradually. The American official, speaking to reporters on condition of anonymity, said the U.S. was encouraged by progress on the Chinese currency. The International Monetary Fund can help referee the debate over lopsided trade flows, the official also said.
The agreements emerged after leaders struggled to find ways to address trade imbalances as China rejected policy prescriptions that fault its exchange-rate policy and directed criticism at monetary easing in the U.S. At stake for the global economy is averting a repeat of the currency and trade tensions that erupted in the 1930s and were blamed for worsening the Great Depression.
The pivotal roles China and the U.S. must play to get a breakthrough at the G-20 was underscored by an 80-minute meeting between Presidents Barack Obama and Hu Jintao yesterday dominated by a discussion about exchange rates.
U.S. Treasury Secretary Timothy F. Geithner has said that the yuan remains undervalued and that China needs to show a continued commitment to allow its currency to rise further over time. China has argued that a quick increase in the yuan’s value would cause economic and social disruption.
G-20 finance ministers and central bankers, meeting last month in South Korea, agreed to move toward “reducing excessive imbalances” assessed against “indicative guidelines to be agreed.”
The U.S. official said language agreed upon today is stronger in some ways than the ministers’ communiqué in Gyeongju on Oct. 23.
While Geithner said at the time that a ratio for current- account surpluses or deficits of 4 percent of gross domestic product was “likely to emerge as the basic benchmark countries look to,” countries from China to Germany rejected any move to set a target for current-account surpluses or deficits as a percentage of GDP.