February 18, 2011
G-20 Nears Deal on Imbalance Measures
PARIS—The Group of 20 industrial and developing nations is headed toward agreement on setting four indicators as guidelines for measuring global economic imbalances, senior G-20 officials said Friday.
The four indicators would be current-account imbalances, public-sector debt, private-sector debt and one indicator for the real effective foreign exchange rate and the size of foreign-exchange reserves.
Previously, it was expected that five indicators would be set, with the exchange rate and reserves set as two independent indicators.
As the G20 approaches, China’s economic policies are raising tensions with trading partners, with the WTO set to say China can’t restrict exports on raw materials and France’s Sarkozy struggling to push on yuan reforms. WSJ’s Jake Lee and Finance Reporter Alison Tudor discuss.
Nonetheless, the inclusion of the real exchange rate could prove a major compromise from countries such as China that have long resisted international pressure to make their currency regimes more flexible.
“They are getting close to agreement,” said one G-20 official close to the talks. “Unless there is a surprise, the four indicators will be included in the final communiqué.”
Another source also said there is no final agreement yet but that the current plan is for the four indicators to be included.
OECD Secretary General Jose Angel Gurria sat down with Dow Jones FX Trader during the meeting of G-20 finance officials in Paris to talk about global imbalances and the eurozone’s debt crisis.
However, China’s Finance Minister Xie Xuren said Beijing opposes including the foreign-exchange rate and foreign-exchange reserves in the indicators.
“We oppose the use of REER and foreign exchange reserves as indicators,” he said in a meeting with officials from Brazil, India and Russia.
Speaking to reporters after the meeting, Russian Deputy Finance Minister Dmitry Pankin said his government also has reservations about the inclusion of foreign exchange reserves as an indicator. Both China and Russia have large foreign exchange reserves.
“Reserves are the main stumbling block,” Mr. Pankin said. “China is against limiting reserves. We also think that using reserves as an indicator is not completely correct.”
Mr. Pankin added that while large developing countries may be able to agree upon a common position on which indicators are appropriate, it might not be possible to reach agreement within the G20 as a whole.
“The BRICs can probably find a consensus amongst themselves,” he said.
“The question is whether one can be found within the G20.”
Even if an agreement is reached, it won’t mean much without specific numbers, including numerical targets. Mr. Xie said even if the indicators do suggest that a country’s policies are contributing to global imbalances, that shouldn’t trigger an automatic response. “Guidelines should not be compulsive, but a means of internal review,” he said.
France has set as a key goal of this weekend’s meetings an agreement on a set of indicators that will be used to gauge whether countries are pursuing policies that cause imbalances in the world economy. While finance ministers and central bankers from the G-20 meet later Friday, deputies have been grappling with the issues over the last 24 hours in an effort to clinch a consensus.
One of the officials said there had been no significant debate over U.S. monetary policy. He also said there hasn’t been “a lot” of pressure on the euro-zone over its debt crisis.
He added there has been lively debate on developing a code of conduct on the use of capital controls but that discussions are still at a “very early stage” and are unlikely to lead to a deal this weekend.
The official said the European Union and Turkey have been among those speaking out against greater use of capital controls but many emerging nations such as Brazil are strongly in favor of the principle.
He said the debate currently centers on whether the G-20 should ask the International Monetary Fund to draw up a set of guidelines on when capital controls should be used. He said supporters of capital controls are resisting any kind of rules.
A number of emerging economies have employed capital controls to limit what they say is the destabilizing effect of hot-money capital inflows. China and some others say these inflows are being stoked by the U.S. Federal Reserve’s easy monetary policies.
G-20 Nears Deal on Imbalance Measures
PARIS—The Group of 20 industrial and developing nations is headed toward agreement on setting four indicators as guidelines for measuring global economic imbalances, senior G-20 officials said Friday.
The four indicators would be current-account imbalances, public-sector debt, private-sector debt and one indicator for the real effective foreign exchange rate and the size of foreign-exchange reserves.
Previously, it was expected that five indicators would be set, with the exchange rate and reserves set as two independent indicators.
As the G20 approaches, China’s economic policies are raising tensions with trading partners, with the WTO set to say China can’t restrict exports on raw materials and France’s Sarkozy struggling to push on yuan reforms. WSJ’s Jake Lee and Finance Reporter Alison Tudor discuss.
Nonetheless, the inclusion of the real exchange rate could prove a major compromise from countries such as China that have long resisted international pressure to make their currency regimes more flexible.
“They are getting close to agreement,” said one G-20 official close to the talks. “Unless there is a surprise, the four indicators will be included in the final communiqué.”
Another source also said there is no final agreement yet but that the current plan is for the four indicators to be included.
OECD Secretary General Jose Angel Gurria sat down with Dow Jones FX Trader during the meeting of G-20 finance officials in Paris to talk about global imbalances and the eurozone’s debt crisis.
However, China’s Finance Minister Xie Xuren said Beijing opposes including the foreign-exchange rate and foreign-exchange reserves in the indicators.
“We oppose the use of REER and foreign exchange reserves as indicators,” he said in a meeting with officials from Brazil, India and Russia.
Speaking to reporters after the meeting, Russian Deputy Finance Minister Dmitry Pankin said his government also has reservations about the inclusion of foreign exchange reserves as an indicator. Both China and Russia have large foreign exchange reserves.
“Reserves are the main stumbling block,” Mr. Pankin said. “China is against limiting reserves. We also think that using reserves as an indicator is not completely correct.”
Mr. Pankin added that while large developing countries may be able to agree upon a common position on which indicators are appropriate, it might not be possible to reach agreement within the G20 as a whole.
“The BRICs can probably find a consensus amongst themselves,” he said.
“The question is whether one can be found within the G20.”
Even if an agreement is reached, it won’t mean much without specific numbers, including numerical targets. Mr. Xie said even if the indicators do suggest that a country’s policies are contributing to global imbalances, that shouldn’t trigger an automatic response. “Guidelines should not be compulsive, but a means of internal review,” he said.
France has set as a key goal of this weekend’s meetings an agreement on a set of indicators that will be used to gauge whether countries are pursuing policies that cause imbalances in the world economy. While finance ministers and central bankers from the G-20 meet later Friday, deputies have been grappling with the issues over the last 24 hours in an effort to clinch a consensus.
One of the officials said there had been no significant debate over U.S. monetary policy. He also said there hasn’t been “a lot” of pressure on the euro-zone over its debt crisis.
He added there has been lively debate on developing a code of conduct on the use of capital controls but that discussions are still at a “very early stage” and are unlikely to lead to a deal this weekend.
The official said the European Union and Turkey have been among those speaking out against greater use of capital controls but many emerging nations such as Brazil are strongly in favor of the principle.
He said the debate currently centers on whether the G-20 should ask the International Monetary Fund to draw up a set of guidelines on when capital controls should be used. He said supporters of capital controls are resisting any kind of rules.
A number of emerging economies have employed capital controls to limit what they say is the destabilizing effect of hot-money capital inflows. China and some others say these inflows are being stoked by the U.S. Federal Reserve’s easy monetary policies.
