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Canada, U.S. reject China’s demand that fixed currency be left off G20 agenda

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Canada, U.S. reject China’s demand that fixed currency be left off G20 agenda

Post  Shilo on Sat Jun 19, 2010 5:09 pm

June 19, 2010 · Posted in NEWS


OTTAWA - Canada appears to be taking on the role of the intermediary in a brewing battle between Washington and Beijing that threatens to dominate next week’s G20 summit.

In a briefing Friday, a senior Canadian official appealed for calm over strident calls in the United States for China to properly value its currency.

Using much the same language as a Chinese official had used earlier in the week, the official said care should be taken against the issue spilling over into finger-pointing at the summit.

But he also made clear that the yuan will be part of the discussions at next weekend’s G20. Many western countries believe it is grossly undervalued and a major contributor to growing trade imbalances.

Earlier in the week, Chinese officials said the G20 was not the appropriate forum for discussions on the yuan.

“If we allow the G20 to turn into a process of finger-pointing, then it will certainly send out a very confusing and misleading signal to markets,” said a spokesman for the Chinese foreign ministry.

In another briefing, Chinese government officials stressed that Beijing’s currency policy is conducted for the benefit of its own people and that the international community should butt out.

But in a letter issued Friday morning, President Barack Obama made clear he wants the yuan to be central to the discussions about setting the global economy on a path to a balanced and sustained recovery.

“I want to underscore that market-determined exchange rates are essential to global economic vitality,” wrote Obama in a letter to his G20 colleagues.

“The signals that flexible exchange rates send are necessary to support a strong and balanced global economy.”

Prime Minister Stephen Harper also said the yuan should be part of the agenda at the G20 in a letter he sent out Thursday night.

Anger has been building in the U.S. over the currency issue, with many in Congress accusing China of keeping the yuan artificially low to flood the world with cheap products, at the expense of American producers and jobs.

Michigan Democrat Sander M. Levin, chair of the powerful ways and means committee, has threatened that if China does not act promptly, “Congress will act.”

Analysts worry the war of words could spill over into a trade war unless cooler heads prevail.

The Canadian official, who spoke on background, said the Chinese currency will be discussed despite China’s objections.

But he stressed the discussions around the yuan should take place as part of talks on how each country in the G20 needs to do its part to support global growth and not in isolation.

China maintains its currency policy poses no obstacle to global economic growth.

Beijing allowed its currency to rise in value from July 2005 until the summer of 2008 by about 20 per cent. When the global economic downturn began, it abruptly halted the rise amid concern that a stronger yuan would hurt its exports.

http://ca.news.finance.yahoo.com/s/18062010/2/biz-finance-canada-u-s-reject-china-s-demand-fixed.
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