UPDATE 1-China says G20 imbalance target curbs its growth

* China Vice Finmin says U.S. trying to contain China

* Says euro zone debt crisis could get worse

* Says Fed easing adds inflationary pressure for China

(Add details, quotes, background)

BEIJING, April 12 (Reuters) – A U.S.-proposed target to
limit countries’ current account imbalances is a “political
tool” aimed at containing China’s economic growth, China Vice
Finance Minister Li Yong said on Tuesday.

In what is China’s fiercest rebuttal so far to the U.S.
proposal to limit countries’ current account deficits or
surpluses to below 4 percent of gross domestic product, Li said
such curbs overlook the “right” of nations to develop and grow.

The remarks underscore the difficulties that finance
ministers from the Group of 20 (G20) nations face when they meet
on April 15 to discuss how to rebalance the global economy,
among other issues, on the sidelines of IMF meetings.

“It is another political tool, along with the exchange rate
issue, of the United States and developed countries to contain
China’s economic development,” Li wrote in an article published
on the ministry’s website.

“The external imbalance is a sensitive issue regarding the
rights of China and other emerging economies to develop and
grow,” Li said.

China has opposed the idea of targeting countries’ current
account imbalances ever since it was suggested by U.S. Treasury
Secretary Timothy Geithner as a measure to use to rebalance the
world economy.

Analysts say while China is amenable to importing more to
help rebalancing efforts, it does not want to be assessed on its
huge current account surplus because that includes interest
payments on nearly $3 trillion of foreign reserves accumulated
over the years.

Instead, China prefers to be assessed on its trade surplus,
which has been narrowing as it imports more.

At a G20 meeting in Paris earlier this year, Chinese Finance
Minister Xie Xuren said the G20 should assess distortions in the
economy by measuring trade rather than current account balances,
and also rejected using real exchange rates and currency
reserves as measures.

That left China as a major impediment to a G20 deal, and
cast doubts over the group’s ability to agree to a set of
guidelines to improve the world economy. [ID:nLDE71H0AV]

Li on Tuesday sought to draw attention away from China,
however.

Reiterating China’s long-standing assertion that the United
States has a hand in much of the world’s economic woes, Li said
super-loose monetary policies in the United States and elsewhere
were fuelling inflation.

He also said the European debt crisis could worsen by
spreading from the peripheral euro zone region.

He said loans from the International Monetary Fund and
European Union to struggling euro zone countries do not address
“underlying structural problems”, among which is the dearth of a
unified fiscal policy in the euro zone.

“Austerity measures that are being imposed may worsen the
economic and debt conditions in the countries,” Li said. “The
euro debt crisis may continue to spread and deteriorate.”

As such, Li said he expected the U.S. dollar and euro to
weaken. That will be a headache for China since its $2.85
trillion foreign reserves are primarily invested in the two
currencies.

(Reporting by Zhou Xin and Koh Gui Qing; Editing by Ken Wills)

UPDATE 1-China says G20 imbalance target curbs its growth