SINGAPORE: G7 tells China to take its currency off the leash; Singapore stops opposition protest

The Group of Seven (G7) rich nations took aim at China on Saturday (September 16), urging Beijing to let its currency rise faster to ease imbalances in trade and capital flows that pose one of the biggest risks to global growth. In a statement issued after an afternoon of talks, G7 finance ministers and central bank chiefs complained that large emerging economies were not pulling their weight in the collective management of the global economy. Beijing, blamed by critics for holding the yuan down to boost its exports, was the only country singled out by name. "Greater exchange rate flexibility is desirable in emerging economies with large current account surpluses, especially China, for necessary adjustments to occur," the G7 said in a statement. The G7 had already pointed the finger of blame at China at its previous meeting in April 2006, and officials said the renewed reference on Saturday reflected frustration at the glacial pace of the yuan's climb. China is pivotal because, without a sharp rise in the yuan, its Asian neighbors will be reluctant to let their own currencies appreciate for fear of losing competitiveness. China revalued the yuan, or renminbi, by 2.1 percent in July 2005 and cut it free from a decade-old dollar peg. Since then, the currency has risen only another 2 percent. Japanese Finance Minister Sadakazu Tanigaki, and chairman of the G7 meeting, told reporters that major changes needed to be introduced to China's economy. "With regards to China, their savings rate is nearing fifty percent and in that context, how could consumption be expanded was one of the important issues to be addressed. So that incomes need to be redistributed and that the social security system needs to be reinforced, and also there is a coastal region as opposed to an inland region, and it is a gap that needs to fulfilled by having an adequate transfer,"said Tanigaki. Still, officials said the G7 was wary of applying too much pressure on Beijing, fearing public criticism would backfire. "Excess volatility and disorderly movements in the exchange rate is undesirable for world economic growth. It should reflect the economic fundamentals. So rather than talking about the renminbi itself, we looked at the emerging economies' currencies and discussed that maybe further flexibility is needed," Tanigaki added. Financial markets had eagerly awaited the meeting of the G7 - the United States, Japan, Germany, Britain, France, Italy and Canada - but the communique broke no new ground. However, G7 officials appeared to open the door for a rise in the yen, which has fallen to a 21-year low in inflation-adjusted terms: Tanigaki and French central bank governor Christian Noyer both said the yen would reflect the recovery in Japan's economy. The G7 said that, despite the current strong performance, its economies faced the risk of rising inflationary expectations, tight energy markets and spreading protectionism. Apart from a call to revive the World Trade Organisation's deadlocked Doha Round of market-opening talks, the G7 statement was silent on concrete policy initiatives to counter these risks. "With regards to trade, ministers continue to urge all parties to show political will and flexibility necessary to resume the Doha Development Round as soon as possible," Japanese Finance Minister Tanigaki said. Instead the group limited itself to a general statement of intent, coupled with a nudge to Asian countries and oil-producing states to do more to reduce their big trade surpluses. "We reaffirm our strong commitment to pursuing sound policies, and call on others to join us to meet the shared responsibility for orderly adjustment of global imbalances," the G7 said. Chinese officials, who got a chance to make their case at a working G7 lunch, had no immediate comment on the communique, but earlier restated their aim to let the yuan trade more freely. Chinese Finance Minister Jin Renqing was confident that China would move forwards to meet the challenge of globalisation. "Of course, under the push of the globalised economy, China's economy also has to open up to merge into the world's economy. Remember, our economy with developed countries, the purchase of talents is mutually beneficial because we have enough resources. As developing countries provide competition to boost one another's economy, surely we can progress and benefit at the same time," said Renqing. Earlier on Saturday (September 16) Singapore police stopped an opposition politician from leading a protest march past the venue for the annual IMF-World Bank meetings, again highlighting the city-state's restrictions on freedom of speech. Opposition politician Chee Soon Juan, secretary-general of the tiny Singapore Democratic Party (SDP) and six other activists wearing white tee-shirts with slogans such as 'Freedom Now' held a rally at 'Speaker's Corner'. But police stopped their planned march to the convention centre, where the IMF/World Bank meetings are taking place. "We are citizens of Singapore. And as citizens, we have rights. Only slaves don't have rights. Only slaves are afraid of the government. As citizens of Singapore we will not be afraid of the government," Chee told a crowd of about 200 people, including journalists. Under Singapore law, public gatherings of more than four people require a police permit. Before Chee arrived, police asked members of the crowd for their names and their reason for gathering at the park. The moves to stop the protest march came a day after Singapore said it would allow 22 blacklisted globalisation protesters to enter the country. After withering criticism from World Bank President Paul Wolfowitz, Singapore said it would allow 22 of the 27 activists on an immigration blacklist into the country. The remaining five would be "subject to interview and may not be allowed in", the Singapore organising committee for the meetings said in a statement. Singapore police say the tight controls are necessary because the tiny island state with the most advanced economy in southeast Asia was a terrorist target. More than 160 civil society organisations, which were meeting on the Indonesian island of Batam on Friday -- a 40-minute boat ride from Singapore -- declared a boycott of the meetings, in response to Singapore's restrictions.

ITN Source | September 17, 2006

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