November 9, 2010 / 5:05 AM / 9 years ago

WRAPUP 5-China, Germany slam U.S. policy before G20 summit

  
 * China warns Federal Reserve easing can cause bubbles
 * Obama: much more work needed to ensure balanced growth
 * Germany, Brazil warn of protectionist danger
 * Japan's Noda: G20 current account targets deal unlikely
 (Adds Obama, Chinese president, Brazil trade secretary)
 By Emily Kaiser
 SEOUL, Nov 9 (Reuters) - China kept up a drumbeat of
criticism of U.S. easy money policies on Tuesday, warning two
days before a G20 world economic summit that Washington could
destabilize the global economy and inflate asset bubbles.
 Nearly a week after the U.S. Federal Reserve announced it
was going pump as much as $600 billion into the economy, world
leaders continue to bash the plan, saying it will flood global
markets with cash without doing much for the U.S. recovery.
 President Barack Obama acknowledged in Jakarta that the
Group of 20 rich and developing nations "still have a lot of
work to do" to ensure balanced global growth. [ID:nSGE6A80OT]
 Without giving names, he complained about countries that
are intervening in currency markets to maintain a trade
advantage. Later, he said Washington was not trying to contain
China's economic growth.
 "We want China to succeed and prosper. It's good for the
United States if China continues on the path of development,"
he told a press conference.
 The United States has long accused China of keeping the
yuan artificially weak to benefit its exporters. But Chinese
officials now say the Fed is weakening the dollar with a second
round of quantitative easing, which is equal to printing
money.
 German Chancellor Angela Merkel said she hoped to avoid a
confrontation between China and the United States in Seoul, and
warned against protectionism. But she dismissed U.S. calls for
numerical limits for current account balances. [ID:nLDE6A72FD]
 U.S. Treasury Secretary Timothy Geithner has already backed
away from the proposal to set targets for current account gaps.
Japanese Finance Minister Yoshihiko Noda said it was not likely
the G20 would agree on any hard numbers.
 "It's more likely that countries will agree a common
approach, and finance ministers from the member countries will
debate the details later," he told reporters in Tokyo.
 BUBBLES, PROTECTIONISM
 Ma Delun, a deputy governor of the People's Bank of China,
said he was concerned the Fed's spending spree may undermine
efforts to balance out global growth. [ID:nBJB003995]
 The Fed's program "may add risks to the global economic
imbalance, put pressure on emerging markets to adjust their
international balance of payments and could also stir the
formation of asset bubbles," Ma said in Beijing.
 In the latest move by an emerging economy to brake inflows
of "hot money," Taiwan decided to bar foreign investors from
placing more than 30 percent of their funds in Taiwan in local
government bonds and money-market products, reviving a curb
scrapped in 1995. [ID:nTPV002146]
 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
  Multimedia PDFs>>
  G20 battle lines:  r.reuters.com/jux34q
  Basel III - reshaping the rules: r.reuters.com/zys68p
  Analyses>>
  Graphics>>
  Capital flows to emerging world: r.reuters.com/hep83q
  G20 economies comparison:        r.reuters.com/men39p
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 Leaders of the Group of 20 economies meet on Thursday and
Friday, eager to show they have not lost the cooperative spirit
forged during the depths of the financial crisis in 2008.
 But growing discontent over exchange rates and trade has
exposed deep international rifts. If the leaders are unable to
calm tensions this week, investors could grow more concerned
that global cooperation is gone.
 High on the worry list is protectionism. The Fed's
bond-buying program has deepened concerns that the U.S. dollar
is headed lower, hurting exports from other countries. China's
tight grip on the yuan means other emerging markets such as
Brazil end up taking the brunt of the currency adjustment.
 A "trade war" could follow suit if the G20 fails to achieve
a global solution for currency imbalances, Brazil's Foreign
Trade Secretary Welber Barral told Reuters. [ID:nN09157255]
 In an interview with the French media, Chinese President Hu
Jintao called for the abolition of all forms or protectionism.
[ID:nPIS9ME6EP]
 World Bank President Robert Zoellick called for a new
global currency system, perhaps with gold as a reference point.
The idea drew criticism from many policymakers and economists
and there was no indication it was on the G20's agenda.
 SECURITY TIGHTENS
 Seoul raised its security alert to its highest level due to
concerns of violent anti-capitalist protests -- a common
feature of past G8 and G20 summits -- and worries that rival
North Korea may try to stage an incident to embarrass it.
 Inside the security zone, keeping the political peace will
be a priority for G20 leaders.
 The leaders agreed last year on a "framework" for more
balanced growth, which called on surplus countries such as
China to bolster domestic demand while the United States and
other big importers boosted savings and investment.
 Despite well-publicized differences, Geithner insisted
there was broad agreement among G20 members --including China--
to narrow those imbalances.
 "I'm very confident that you're going to see very strong
consensus on this basic framework," Geithner told an audience
of Indian business leaders. "The Chinese are very supportive of
it. It has a lot of benefits to them."
 (Additional reporting by Neil Chatterjee in Jakarta, Jeremy
Laurence in Seoul, Stanley White in Tokyo, Aileen Wang and Ben
Blanchard in Beijing, Ana Nicolaci da Costa and Isabel Versiani
in Brasilia, David Lawder in New Delhi; Editing by John
Chalmers, Paul Taylor and Andrew Hay)


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