Asia-Pacific finance ministers were set to call for flexible exchange rates among measures to try to reduce global economic imbalances that were at the heart of the financial crisis.
The 21-member Pacific Rim group includes China, which is under pressure, particularly from the United States, to allow its currency to rise, having effectively pegged it against the dollar since the middle of 2008 to help fend off the global downturn.
“We agreed that flexible prices, including exchange rates and interest rates, play a critical role in allocating resources efficiently, and can facilitate the adjustments needed to support balanced and sustainable global growth,” the latest draft statement by the finance ministers said.
Foreign, trade and finance ministers from the Asia-Pacific Economic Cooperation forum (APEC) have gathered in Singapore ahead of a summit of their national leaders this weekend focused on avoiding future crises, whether financial or climatic.
APEC is dominated by members of the Group of 20, including the United States, Russia, Japan and China, which has supplanted the Group of Seven as the world’s premier forum for global policy making.
Press liaison officers said Chinese representatives were present when the finance ministers’ draft was discussed.
The APEC draft statement coincided with a monetary policy statement by China’s central bank, the People’s Bank of China, that provided the country’s clearest signal yet that it would allow the currency to appreciate again.
It said it will consider major currencies in guiding the yuan.
Beijing’s control of the yuan is a hot-button topic. The U.S. administration of Barack Obama says the yuan is undervalued and is one factor contributing to economic imbalances between the two countries, the first- and third-biggest economies in the world.
Obama told Reuters in an interview that he would be raising with Chinese leaders the sensitive issue of their yuan currency when he visits China next week.
Speaking in the Oval Office, Obama warned that the economic relationship between the two countries had become “deeply imbalanced” in recent decades, with a yawning trade gap and huge Chinese holdings of U.S. government debt.
Obama said he would work with China on his Asian visit to address the economic recovery and trade imbalances.
The U.S. Treasury Department said in a semi-annual report on currency practices of key trade partners that China was piling up foreign exchange reserves at a rate that threatens progress in reducing global economic imbalances.
While China has been under pressure over the yuan, Washington for its part has been under pressure over the weakening dollar, which fell to a 15-month low on Wednesday.
U.S. Treasury Secretary Timothy Geithner said on Wednesday he believes strongly in the need to maintain a strong dollar and said America was determined to get its budget deficit down.
“I believe deeply that it’s very important to the United States, to the economic health of the United States, that we maintain a strong dollar,” Geithner said in a meeting with Japanese reporters at the U.S. embassy on Tokyo.
The U.S. Treasury chief was visiting Japan before heading later on Wednesday to Singapore to join the meeting of APEC finance ministers on Thursday.
DEEPLY IMBALANCED
Foreign, trade and finance ministers from APEC are in Singapore for meetings that will culminate in a weekend summit that Obama and other leaders will attend.
After foreign and trade ministers met for breakfast on Wednesday, Singapore’s representative George Yeo said they had discussed the global economic recovery, reform of financial institutions and resisting protectionism.
He said the consensus among ministers was that the global economic crisis was “by no means over”.
“The upturn that we now have is a respite. The situation is still fragile. We should still address the root cause of the problem,” he said.
The draft finance ministers’ statement agreed member economies with big deficits would undertake policies to support savings and those with surpluses would take steps to boost domestic demand to address the imbalances.
The finance ministers are expected according to the draft statement to pledge to maintain economic stimulus plans to support a global economic recovery.
World Bank President Robert Zoellick said he was comfortable about the world’s growth prospects this year, but said there were risks.
“Recovery globally is not going to be symmetrical. It’s going to be at a different pace,” he told reporters in Singapore.
The trade and foreign ministers also have other issues on their agenda — including ways to mitigate the impact of climate change by promoting energy efficiency.
They will look at various models for a possible Asia-Pacific free trade area, which leaders of the group could then discuss at their weekend summit in Singapore.
APEC member economies account for 40% of the world’s population across four continents, more than half of global gross domestic product and nearly half of world trade.
But their members range from relatively poor countries such as Papua New Guinea, Peru and the Philippines, emerging markets such as Indonesia, Thailand and Malaysia, and rich economies, including the United States and Japan.
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