PRESIDENT Obama is likely to raise the issue of China’s tight control of its currency, which many lawmakers and business leaders say makes Chinese goods cheaper to sell on world markets. China on the other hand, is concerned with and has questions about the new U.S. monetary policy featuring a second round of quantitative easing (QE2) and will discuss it with the U.S. at the upcoming G20 summit in Seoul. Briefing the media regarding Chinese President Hu Jintao’s attendance to the summit, China’s Vice Minister of Finance Zhu Guangyao urged the United States to “realize its responsibility and obligation as a major currency issuing country and take responsible macroeconomic policies “ that should be conducive to the development of the world economy, “not the contrary”. The communique of the meetings of G20 finance ministers and central bank governors has stressed that countries with systemic influence should pay attention to the “spillover effect” of their macroeconomic policy.
As the recovery of world economy is still unstable, a responsible macroeconomic policy will not only be good for the United States, but also the world as a whole, the vice finance minister stressed. He has reiterated that China will hold candid discussions with the U.S. side on the issue and pointed out that the current situation is totally different from the time of the first round as there is no shortage of funds in the financial market. Recently the U.S. Federal Reserve (Fed) has planed to purchase 600 billion U.S. dollars worth of government bonds in a bid to revive the sluggish U.S. economy. This is the second round of such stimulus measures, after the Fed purchased 1.7 trillion U.S. dollars worth of mortgage-backed securities and treasury notes between December 2008 and March 2010 in a bid to keep the economy from plunging into another Great Depression.he Daily Mail observes that the Chinese government is emphasizing the themes of global economic stability and unity as President Hu Jintao prepares to go to the back-to-back G20 and Asia Pacific Economic Cooperation summit meetings. Beijing also is hitting back at calls to re-value its currency, by criticizing recent U.S. moves that could weaken the dollar.
China’s Assistant Foreign Minister Liu Zhenmin says his country is ready to work with the rest of the international community to coordinate policies aimed at hastening the world economic recovery. During the two coming international meetings, says Liu, leaders will discuss the world economic situation, reforming international financial institutions, trade and financial regulation. He calls the Group of 20, which meets first, a “premier forum” for global economic governance. Currency is one issue that is expected to be high on the agenda. The United States and other countries for years have called on China to allow the value of its currency, the Yuan, to rise. Envious of China’s rising economic strength, critics accuse China of maintaining an unfair trade advantage by keeping the Yuan’s exchange rate artificially low. China rejects any charges of manipulation of the Yuan and says reform of its exchange rate regime is continuing at its own pace. China has a right to be concerned at any attempt by the US to artificially and intentionally drop the dollar’s value because besides hurting the world economy, a substantial U.S. devaluation could hurt the value of U.S. assets that China owns. China is the top foreign holder of U.S. debt, with more than $860 billion in Treasury bonds.
The two-day G20 summit starts in Seoul on Thursday. It brings together leaders of the eight leading industrialized nations, plus major emerging market and smaller industrialized countries, which together represent more than 85 percent of the global economy. The G20 will be followed by the annual summit meeting of the Asia Pacific Economic Cooperation forum, in Yokohama, Japan. The most important issue will be whether the countries can strengthen economic coordination, following the financial crisis. G20 success will be whether the countries can reach a consensus on strengthening macroeconomic collaboration. China has been one of the world’s economic bright spots since the global financial crisis that began in 2008. While major developed economies still struggle to recover, China has been registering strong growth and has overtaken Japan as the second largest economy – right behind the United States; thus the attempts by its detractors to criticize it unfairly – Dailmailnews