China against current account limits: G20 source

GYEONGJU, South Korea (BestGrowthStock) – China has made clear it will not agree to a G20 communique that explicitly binds countries to limits on current account balances or any other form of rules on currency policy, a G20 source told Reuters on Friday.

Finance officials from the Group of 20 leading nations started two days of meetings on Friday. A statement is expected on Saturday.

The proposal to set a target of 4 percent of gross domestic product for current account surpluses and deficits came from the United States and appeared aimed at China’s trade surplus.

G20 nations should refrain from currency policies aimed at gaining a competitive edge, U.S. Treasury Secretary Timothy Geithner said in a letter to G20 finance chiefs.

“China has clearly said that it will not accept a communique that spells out any target on the current account or for that matter any kind of FX norm,” the source, who has direct knowledge of the deliberations, said.

“So the communique will avoid any such reference, but much of Geithner’s proposals could find their way through as one of the options on the table.”

Chinese officials have made no public comments on Geithner’s proposal.

China, Russia, Germany and Saudi Arabia are all running trade surpluses above the mooted threshold, while the United States is running a deficit of around 3 percent of GDP.

The source said proposed language on urging nations to abstain from competitive devaluations could be softened.

There was also still a “great divide” between the disparate group of emerging and developed countries on IMF reforms, primarily over how to increase the voting power of emerging nations by transferring it from over-represented members, he said.

“It will broadly reiterate the agreed principle of a shift in the power/voting hierarchy without getting into specifics because that’s not decided,” the source said,

With this week’s discussions laying bare each country’s agendas on various issues, concrete decisions would be taken only at the meeting of G20 leaders in South Korea on November 11-12, the source said.

“Positions are still very much divided. It’s a rift down the middle on both issues, especially on currency — the seemingly conciliatory talk notwithstanding.

“So the communique will try and balance out the issues by including the counterpoints and, in tricky areas, the language adopted will be bland,” the source said.

(Reporting by Abhijit Neogy; Editing by Vidya Ranganathan)

China against current account limits: G20 source