Group of 20 nations' efforts to tackle currency and trade imbalances have floundered as China rejected policy prescriptions that fault its exchange-rate regime and directed criticism at additional monetary easing in the United States.
"Don't make other people take the medicine for your disease," said Yu Jianhua, a director-general at
China's Ministry of Commerce. "Quantitative easing will have a very big impact on developing countries, including China."
At stake for the global economy is averting a repeat of the currency and trade tensions that erupted in the 1930s, which were blamed for worsening the Great Depression.
The pivotal roles China and the US must play to get a breakthrough at the G-20 was underscored by an 80-minute meeting between presidents Barack Obama and Hu Jintao, dominated by exchange rates.
"The Chinese can't help but think this is just a way of continuing to point the finger at China," said Neil Mackinnon, an economist at VTB Capital in London. "It doesn't look as if we're going to see anything specific or substantive that will address global imbalances."
China's record US$28 billion trade surplus with the US in August heightened criticism its Government maintained an unfair cap on yuan appreciation to the detriment of US businesses.
Obama, who has pledged to double exports within five years, has sought to broaden the currency debate by linking it to a worldwide effort to rein in current-account excesses.
Germany's current-account surplus as a percentage of gross domestic product for this year is set to be 6.1 per cent, the second highest in the G-20, after Saudi Arabia, based on International Monetary Fund projections.
The US is likely to see a deficit of 3.2 per cent of GDP, the third highest.
China is seeking to modify the language on trade imbalances in the summit communique, says a German official taking part in the talks.
G-20 finance chiefs last month agreed to "pursue the full range of policies conducive to reducing excessive imbalances and maintaining current account balances at sustainable levels".
"It's not about assigning blame to who is in deficit and who is in surplus," said Josef Ackermann, chief executive officer of Deutsche Bank. "But to create a framework to find the right balance."
The yuan has risen about 3 per cent against the US dollar since June.
- BLOOMBERG
