China hits back at US plans

Beijing (Reuters): China on Friday pushed back strongly against U.S. policies ahead of a G20 summit, ridiculing Washington’s plan to set current account targets and warning of risks in the Fed’s monetary easing.

The remarks by Cui Tiankai, a vice Chinese Foreign Minister, were the first high-level expression of Beijing’s stance on the issues.

“We believe a discussion about a current account target misses the whole point. If you look at the global economy, there are many issues that merit more attention -- for example, the question of quantitative easing,” he said.

The United States proposed at the G20 finance ministers’ meeting last month that countries should cap current account surpluses or deficits at 4 percent of GDP as part of efforts to rebalance the global economy.

The idea of numeric targeting met strong resistance from Japan and Germany, though some Chinese advisers had said that Beijing might be able to see eye-to-eye with Washington. Cui put these suggestions to rest.

“Of course, we hope to see more balanced current accounts,” Cui said. “But we believe it would not be a good approach to single out this issue and focus all attention on it. The artificial setting of a numerical target cannot but remind us of the days of planned economies.”

In a briefing on China’s outlook for the G20 summit in Seoul next week, Cui also rejected attempts by other countries to set targets for yuan appreciation.

“That would indeed be asking us to manipulate the renminbi’s exchange rate, and it is something that we will of course not do,” he said. The yuan is also known as the renminbi.

The United States and European countries, among others, have accused China of keeping its currency artificially cheap to give its exporters an unfair advantage. Beijing has repeatedly stated a commitment to reform the yuan and insisted that it alone will decide how to do so.

Cui said China would closely monitor the impact of the Federal Reserve’s plan announced this week to buy $600 billion of U.S. government bonds to stimulate the economy.

“They owe us some explanation,” he said. “I’ve seen much concern about the impact of this policy on financial stability in other countries. As the main issuer of a reserve currency, we would hope that it (the United States) adopts a responsible position.”

Cui added that Beijing would appreciate the chance to have a discussion with the United States about the global consequences of its quantitative easing.

“The Federal Reserve has the right to make its own decisions, and it need not consult with any other country beforehand. And there is no one to impose a specific target on it,” he said.

“But we hope they can consider the impacts on other countries in the world when they make decisions, not just their own economy.”

Emerging market economies said the Fed’s move made a substantive deal on cutting global economic imbalances less likely at the G20 summit next week.

Despite discord over the Fed’s policy and China’s slow pace of currency reform, the Seoul meeting should at least mark a breakthrough in one area of global monetary reform: the recalibration of power at the International Monetary Fund.

The IMF’s board will meet on Friday to discuss a G20 proposal to transfer 6 percent of voting power to under-represented emerging countries, such as China, India and Brazil, from developed economies.

“This is not the end, not even the beginning of the end, but the end of the beginning,” Cui said. “Many countries have said that the quota system itself needs to be reformed, and the IMF governance structure also needs to be reformed.”

The G20 was at a crucial juncture, evolving from an emergency mechanism to deal with the financial crisis to one that promotes global governance reform, Cui said.

With many uncertainties still facing the global economy, a spirit of cooperation was essential, he said.

“China has a saying to describe selfishness, namely ‘destroy the bridge once the river has been crossed’. But the problem is, we have not crossed the river yet, so if someone wants to destroy the bridge, does he not see the risk of falling into the water?”