G-20 meet to highlight China's world finance role

[March 30, 2011]  SHANGHAI (AP) -- As finance mandarins from G-20 nations gather in China for a chat session on reforming global finance, Beijing's efforts to nix discussion of its currency may be made easier by crises in Libya and Japan.

French president Nicolas Sarkozy, who is chairing the G-20 this year, made a brief stop in Beijing on Wednesday evening in an effort to soothe China's anger over U.S. and European airstrikes aimed at enforcing a U.N. no-fly zone over strife-torn Libya.

After attending Thursday's G-20 "seminar" of central bank governors and cabinet ministers on monetary issues in Nanjing, Sarkozy flies to Tokyo. There he will offer support for Japan's effort to resolve a nuclear reactor crisis and overcome the destruction wrought by the March 11 earthquake and tsunami, which killed at least 11,000 people and left many thousands more missing.

Beijing has ruled out any major discussion of its own currency policies -- viewed by Washington and other trading partners as a key factor in global economic imbalances -- at the Nanjing meeting, saying the gathering is unofficial and informal and that its exchange rate policies are not on the agenda.

But disagreements over currencies and monetary policies are bound to shape the talks even if only indirectly, analysts said.

"There are differences of opinion between developed countries and developing countries over monetary issues," said Zhang Xinfa, an economist at Galaxy Securities in Beijing, pointing to the stimulus-oriented policies in the U.S., Japan and Europe that Beijing has said are helping drive inflation in commodity and assets prices.

"That's why they have fundamental differences over the future trend of exchange rates," Zhang said.

Days ahead of the Nanjing meeting, former British Prime Minister Gordon Brown and other top economic policymakers urged the world's most powerful economies to seal a "global growth pact" to fight unemployment.

Speaking at a panel debating the very relevance of the G-20 grouping of major industrialized and developing nations, Brown said the group is challenged over whether it can foster prosperity both for poorer nations in the Middle East and North Africa as well as more established economies in America and Europe.

During Brown's tenure heading the G-20 in 2009, the group made progress on forging tighter financial regulations to help prevent a recurrence of the meltdowns in housing markets that brought on the global financial crisis.

France has made reform of the global monetary system a focal point for its yearlong presidency of the G-20, along with reducing economic imbalances and volatility in commodity prices.

China and key emerging economies, meanwhile, are keen to see changes that might reduce their own reliance on volatile dollar-denominated assets.

One option championed by Beijing would be the use of SDRs, or Special Drawing Rights, a quasi-currency used by the IMF in its dealings with member governments, as an international reserve currency.

China has suggested using SDRs as a substitute for the dominant U.S. dollar as the world's reserve currency. Beijing has invested more than $800 billion of its $2 trillion in foreign reserves in U.S. Treasuries but is uneasy about the dollar's stability and says the world financial system should be more diversified.

During recent talks in Paris, G-20 finance chiefs appeared close to agreement on tracking dangerous imbalances in the global economy by monitoring several key indicators: current accounts, real effective exchange rates, currency reserves and public and private debt levels.

China, however, has opposed focusing on exchange rates due to its resistance to letting its own currency, the yuan, appreciate against the dollar.

[Associated Press; By ELAINE KURTENBACH]

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.