China Finance Talks Target Energy Prices, Balancing Growth; U.S.-China Talks to Begin

Saturday October 15, 8:36 pm ET
By Elaine Kurtenbach, AP Business Writer

XIANGHE, China (AP) -- The threat from high oil prices and lagging growth in poorer nations topped discussions at talks outside Beijing due to wrap up Sunday with a statement by top financial officials of the world's leading economies.

The annual summit of the Group of 20 major industrial nations was to be immediately followed by China-U.S. economic talks that were expected to yield more pressure on Beijing to loosen controls on its currency, the yuan.
U.S. Treasury Secretary John Snow and Federal Reserve Chairman Alan Greenspan were leading the delegation of top economic experts from the administration of President George W. Bush.

Treasury officials said in Xianghe, a heavily guarded fortress-style resort an hour's drive outside Beijing, that they intended to intensify and broaden the debate over China's economic reforms, urging China to further develop domestic demand and financial services -- as well as allowing greater flexibility for the yuan.

The talks are part of an effort to redress the record trade gap between the two countries, which surged to US$162 billion in China's favor last year and is forecast to exceed that figure this year.

"If we truly want to deal with these imbalances bilaterally or multilaterally, you need to focus on more than just the currency," said U.S. Treasury Undersecretary for International Affairs Tim Adams.

"What we have tried to do is take a quantum leap in sophistication and scope so that we can with Congress and with others have a much more informed discussion of how we actually get these things done," he said.
Critics of China's currency policy contend the yuan is undervalued by as much as 40 percent, giving Chinese exporters an artificial price advantage, and that this is a major factor behind the trade imbalance.

Chinese officials say they cannot move any faster in currency reforms after having revalued the yuan by 2.1 percent in July, at the same time giving up a decade-old peg to the U.S. dollar and switching to a basket of major currencies that also includes the Japanese yen and euro. The currency has gained only about 0.3 percent in value since then.

"I don't think that will work toward their interest," Li Ruogu, chairman of the Export-Import Bank of China and a former central bank vice governor, said Saturday of the U.S. pressure.

"China acts as a crucial engine for the whole world and to damage the Chinese growth and Chinese economic development will do no good for anyone," Li told Dow Jones Newswires.

In opening the G-20 meeting, Chinese President Hu Jintao decried the widening divide between the industrialized world and the least developed nations, financial crises and "new manifestations of trade barriers and protectionism."

The talks, which include the Group of Seven industrial nations, leading developing countries and international institutions such as the World Bank and International Monetary Fund, addressed a wide range of issues, including concerns over the prolonged surge in crude oil prices, which are hovering above US$60 a barrel.

Beijing expects the G-20 gathering, whose participants account for 90 percent of the world's gross domestic product and 80 percent of all trade, to issue statements on reforming the international monetary system and on development issues, state media reported.

Securing a stable supply of oil is a major concern for China, whose imports have surged as its economy grows at an annual rate of more than 9 percent.

Delegates to Saturday's talks raised "many good proposals" for financing an IMF program to aid economies badly hit by high oil prices, IMF managing director Rodrigo Rato told reporters.

Rato said high oil prices were bound to persist, posing a threat to stable world growth.

World Bank President Paul Wolfowitz on Saturday urged wealthy nations to make concessions on farm trade to help salvage stalled World Trade Organization negotiations for the sake of the world's poorest 1.2 billion people.
"The solution has to come from opening markets," he said. "These people need aid but more than aid they need a place to sell the products of their work. Otherwise they'll be aid dependent forever and that's not a solution."