WASHINGTON — The United States and its allies, frustrated in their efforts to pressure China directly to change its economic policies, are seeking to enlist other developing nations in an international campaign that China may find more palatable.
At a meeting of finance ministers from the Group of 20 nations on Friday, the United States hopes to advance a set of proposed standards for judging the risks that individual nations pose to the global economy. Those standards could be used by the end of the year to put a spotlight on China for suppressing its currency to keep its exports cheap.
Even if the exercise succeeds, the benefits are unlikely to be tangible or clear. The United States and China have wrangled for years over the relative value of their currencies. The Chinese have made modest concessions in recent years, but mostly because of internal concerns about inflation and economic dependence on exports.
A senior Treasury official said that it was important for countries to establish shared standards, and in particular to highlight that large deficits and large surpluses were two sides of the same issue and merited the same concern.
“This hasn’t been on the table in the past, but that’s where the conversation is moving now and that’s helpful,” said Lael Brainard, the Treasury under secretary for international affairs.
The purpose of the standards is not lost on China, which has resisted the process. In February, the Chinese fought successfully to exclude one important measure, reserves of foreign currencies, from the list of proposed standards.
China holds more than $2.85 trillion in foreign currency, the world’s largest reserve. It has pursued an aggressive policy of printing renminbi to buy foreign currencies, lifting the value of those currencies and holding down the value of its own.
Earlier this week, a senior Chinese official published an article blasting the standards as a “political tool” intended to make developing nations like China pay for the economic recovery of developed nations like the United States.
Li Yong, vice minister of finance, wrote that developed nations were responsible for overprinting their own currencies, driving up the price of commodities and creating inflationary pressures in developing countries. Mr. Li wrote that the real goal of those countries was to increase demand for their own exports.
“The issue of external imbalances is a sensitive topic related to the development rights and growth potential of China and other emerging economies, and is another political tool, after the exchange rate, used by developed nations such as the U.S. to curb China’s economic development,” Mr. Li wrote in the article, which was published on the Web site of the finance ministry.
Still, China has shifted slowly in the direction sought by the international community in recent years. China’s policy makers adopted a five-year plan in October that calls for domestic consumption to replace exports as the driver of economic growth. The country also has allowed its currency to appreciate 4.4 percent against the dollar since last June. American officials describe this as an effective increase of 10 percent because the rate of inflation in China is much higher than in the United States.
The United States has embraced an elevated role for the Group of 20 as the primary forum for international economic coordination.
The Group of 7, which previously played that role, is composed of nations with economies driven by consumption, and currencies that float freely in response to demand. The new seats at the table, by contrast, are held mostly by nations like China, India and Brazil that manage their currencies to create a competitive advantage for their exports.
There is broad agreement that the unbalanced relationship between those two sets of countries — debtors on the one hand, exporters on the other — is a major fault line that threatens global stability. There is much less agreement about the proper allocation of the economic pain associated with potential solutions.
The goal of the current process is to break that controversial issue into manageable pieces. France, the current chairman of the group, has spent this year simply trying to create agreement on the rules for analyzing nations that can be completed by the time heads of state meet in Cannes this fall. Those rules would be used to single out nations that posed the greatest risks for further study.
A French official said he hoped there would be “incremental progress” on Friday.
As if to underscore the gap that must be bridged, the two sides will meet separately on Thursday. Finance ministers from the Group of 7 will consult quietly in Washington. Meanwhile, heads of state from Brazil, Russia, India, China and South Africa — the emerging powers known as BRICS — are meeting on the Chinese island of Hainan.
The governor of Australia’s central bank, Glenn Stevens, meanwhile warned Wednesday there was too much of a focus on the relationship between the United States and China.
Describing the issue of global imbalances in terms of two countries, he said, “risks oversimplifying problems and therefore lessening the likelihood of solutions.” Mr. Stevens spoke to the American Australian Association in New York.
He noted that the United States once described its trade problems in terms of Japan.
David Jolly contributed reporting from Paris and Xu Yan contributed research from Shanghai.
Article source: http://feeds.nytimes.com/click.phdo?i=1e0caab02263cb9011e82634ba136201
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