NEW DELHI (Reuters) - U.S. Treasury Secretary Timothy Geithner on Monday said China is supportive of the Group of 20’s framework for rebalancing the global economy, and he expects broad consensus on it at a leaders’ summit this week.
Geithner, speaking in the Indian capital during a state visit with President Barack Obama, earlier met with Indian Finance Minister Pranab Mukherjee in part to discuss the G20 agenda.
“I‘m very confident that you’re going to see very strong consensus on this basic framework because it meets the basic tests and it’s better than the alternatives,” Geithner told an audience of Indian business leaders.
“The Chinese are very supportive of it. It has a lot of benefits to them.”
The run-up to week’s G20 summit has been overshadowed by disagreements over moves by the U.S. Federal Reserve to print extra money to buy $600 billion of government bonds over coming months.
Critics led by China and Germany argue more quantitative easing could depress the dollar and cause a potentially destabilizing flow of money into emerging economies. Obama defended the policy on Monday, suggesting it was growth-friendly for both the United States and the whole world.
Geithner reaffirmed a G20 plan to limit current account surpluses and deficits does not contain numerical targets, which he called economically unfeasible. Several countries had objected to suggestions that such imbalances be limited to around 4 percent of gross domestic product.
“What we have proposed is a framework which incorporates early warning indicators of large surpluses or deficits which can then be monitored,” Geithner said.
He said limiting current account imbalances was needed to check excess volatility in financial markets and combat protectionist pressures, adding that exchange rates were a key part of the plan.
The U.S. Treasury chief said China was the early stages of reforming its currency, a move that was “overwhelmingly in its interests,” as well as those of its trading partners.
Washington blames Beijing for holding down the yuan at a level it says is unfairly low, giving Chinese exporters a pricing advantage that hurts U.S. jobs. Geithner has delayed the delivery of a report on whether China manipulates its currency until after the G20 summit in Seoul.
“It’s beginning to start to make the changes that will allow for broader convertibility over time, but those are in a very very early stage,” Geithner said of China.
Geithner said the United States would work hard to improve its economic relationship with China.
A U.S. official in Delhi said that even with the currency tensions between the United States and China, the two countries’ economic relationship was flourishing and producing a major increase in U.S. exports to China.
A key reason for Obama’s trip to the region was to show the importance of exports to the United States’ future growth, and to underscore the need to boost growth around the world.
The U.S.-India relationship, the official said, does not carry the same tensions as that with China.
Geithner on Monday praised India’s domestic-driven growth. With stronger investment in infrastructure and financial reforms, it was “perfectly achievable” for India to sustain an 8 percent to 9 percent annual growth rate for years to come.
But with strong growth in emerging economies and capital inflows from slower-growth advanced economies, Geithner said signs of broader inflation pressure were starting to appear in emerging economies.
Geithner said there were signs the U.S. economy was improving, and it could see stronger-than-expected growth rates as it emerges from a period of slow growth rates. It could grow twice as fast as Europe and Japan for a long time to come, he added.
On Wednesday, Geithner will travel to Abu Dhabi, to meet with the crown prince, Sheikh Mohammed bin Zayed al-Nahayan, to discuss efforts to cut off financing for terrorism, and then travel to Singapore for meetings with government officials.
He will end up in Seoul on Thursday to join Obama for the G20 summit.
Additional reporting by Abhijit Neogy; Editing by Bryson Hull, Tony Munroe, John Stonestreet