China reluctant to get involved in balancing act

Hopes for an agreement to address the huge trade surpluses being run up by China, Japan, Germany and other successful exporters – the most important of the so-called global imbalances – were dashed even before the first G20 summit under French chairmanship got under way in Paris.

The Governor of the People's Bank of China declared: "External pressure has never been an important factor of consideration and we have never paid special attention to it." Zhou Xiaochuan's words were an open snub to efforts, led by the French Finance minister, Christine Lagarde, to reach a consensus even on the "indicators" by which these imbalances would be measured – let alone to secure concrete action by Beijing to revalue the Chinese yuan and switch growth away from exports to the West.

Mr Zhou's blunt language suggests both a more assertive Chinese attitude, and that the talks might even go backwards from the commitment made at the November G20 Leaders' Summit in Seoul to move to more "market-oriented" exchange rates – code for an appreciation of the yuan. Since then, the US Federal Reserve's $600bn of quantitative easing has begun, directly injecting money into the American economy, with the indirect aim of pushing the dollar down. The Fed's policy represents the first shot in a potentially disastrous "currency war" between the US and China. Peace seems unlikely to break out between the "G2" in Paris.

Ahead of the talks, the Governor of the Bank of England, Mervyn King, who is attending alongside the Chancellor, George Osborne, issued a stark warning: "All the main players around the world are rationally pursuing their own self-interest. But the financial crisis has revealed that what makes sense for each player individually does not always make sense in aggregate.

"Many policies, in addition to changes in exchange rates, will be needed to reduce imbalances. If agreement is not reached, at best there will be a weak world recovery; at worst, the seeds of the next financial crisis will be sown."

There had been some optimism that having a major economic power such as France driving the G20's discussions would lead to more action than under last year's South Korean leadership. Yet even Mrs Lagarde stressed the modesty of their goals and the two-year timescale envisaged for action: "Once we have these indicators, and that's highly debated at the moment and will be in the next couple of days... then we will move on to agree on guidelines".

The proposed indicators comprise: exchange rates; currency reserves; public debt and deficits; private savings; and, crucially, trade balances. Yoshihiko Noda, for Japan, said: "It is uncertain whether the countries will agree on all indicators, but I think agreement on some is possible." Yet a German source made clear that Wolfgang Schäuble, the Finance minister, would want five or nothing. Caps on current-account trade balances were proposed by the US Treasury Secretary, Timothy Geithner, last year and rejected by China.

There is also scepticism that President Sarkozy, hosting the talks, will persuade others to reach an accord on limiting commodity prices and imposing tougher rules on the big banks.

News
people

Top Gear presenter is no stranger to foot-in-mouth controversy

Arts and Entertainment
Imelda Staunton as Dolores Umbridge in the Harry Potter films
books

New essay by JK Rowling went live on Pottermore site this morning

News
Mike Tyson has led an appalling and sad life, but are we not a country that gives second chances?
people

Mike Tyson branded 'superhero' after a surprise good turn

Sport
A Rutherford Raiders shirt with the PornHub sponsorship
football

PROMOTED VIDEO
Arts and Entertainment
Charlie Sheen said he would
tv

Charlie Sheen could be set to revive his role as a hedonistic womaniser

Life and Style
Jamie Oliver’s version of Jollof rice led thousands of people to post angry comments on his website
food + drink
Arts and Entertainment
glastonbury
News
Apple CEO Timothy Cook
people
News
i100
Arts and Entertainment
Vividly drawn: Timothy Spall in Mike Leigh’s ‘Mr Turner’
film

Review: Mike Leigh's biopic is a rambling, rich character study

News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Trainee Recruitment Consultants

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

Finance Assistant - Part time - 9 month FTC

£20000 - £23250 Per Annum pro rata: Clearwater People Solutions Ltd: Pro rata ...

Marketing Manager

£40 - 48k + Benefits: Guru Careers: We are seeking a Marketing Manager to join...

Market Risk Manager - Investment Banking - Mandarin Speaker

£45,000 - £65,000: Saxton Leigh: Our client is a well-known APAC Corporate and...

Day In a Page

The drugs revolution starts now as MPs agree its high time for change

The drugs revolution starts now as MPs agree its high time for change

Commons debate highlights growing cross-party consensus on softening UK drugs legislation, unchanged for 43 years
The camera is turned on tabloid editors in Richard Peppiatt's 'One Rogue Reporter'

Gotcha! The camera is turned on tabloid editors

Hugh Grant says Richard Peppiatt's 'One Rogue Reporter' documentary will highlight issues raised by Leveson
Fall of the Berlin Wall: It was thanks to Mikhail Gorbachev that this symbol of division fell

Fall of the Berlin Wall

It was thanks to Gorbachev that this symbol of division fell
Halloween 2014: What makes Ouija boards, demon dolls, and evil clowns so frightening?

What makes ouija boards and demon dolls scary?

Ouija boards, demon dolls, evil children and clowns are all classic tropes of horror, and this year’s Halloween releases feature them all. What makes them so frightening, decade after decade?
A safari in modern Britain: Rose Rouse reveals how her four-year tour of Harlesden taught her as much about the UK as it did about NW10

Rose Rouse's safari in modern Britain

Rouse decided to walk and talk with as many different people as possible in her neighbourhood of Harlesden and her experiences have been published in a new book
Welcome to my world of no smell and odd tastes: How a bike accident left one woman living with unwanted food mash-ups

'My world of no smell and odd tastes'

A head injury from a bicycle accident had the surprising effect of robbing Nell Frizzell of two of her senses

Matt Parker is proud of his square roots

The "stand-up mathematician" is using comedy nights to preach maths to big audiences
Paul Scholes column: Beating Manchester City is vital part of life at Manchester United. This is first major test for Luke Shaw, Angel Di Maria and Radamel Falcao – it’s not a game to lose

Paul Scholes column

Beating City is vital part of life at United. This is first major test for Shaw, Di Maria and Falcao – it’s not a game to lose
Frank Warren: Call me an old git, but I just can't see that there's a place for women’s boxing

Frank Warren column

Call me an old git, but I just can't see that there's a place for women’s boxing
Adrian Heath interview: Former Everton striker prepares his Orlando City side for the MLS - and having Kaka in the dressing room

Adrian Heath's American dream...

Former Everton striker prepares his Orlando City side for the MLS - and having Kaka in the dressing room
Simon Hart: Manchester City will rise again but they need to change their attitude

Manchester City will rise again but they need to change their attitude

Manuel Pellegrini’s side are too good to fail and derby allows them to start again, says Simon Hart
Isis in Syria: A general reveals the lack of communication with the US - and his country's awkward relationship with their allies-by-default

A Syrian general speaks

A senior officer of Bashar al-Assad’s regime talks to Robert Fisk about his army’s brutal struggle with Isis, in a dirty war whose challenges include widespread atrocities
‘A bit of a shock...’ Cambridge economist with Glasgow roots becomes Zambia’s acting President

‘A bit of a shock...’ Economist with Glasgow roots becomes Zambia’s acting President

Guy Scott's predecessor, Michael Sata, died in a London hospital this week after a lengthy illness
Fall of the Berlin Wall: History catches up with Erich Honecker - the East German leader who praised the Iron Curtain and claimed it prevented a Third World War

Fall of the Berlin Wall

History catches up with Erich Honecker - the East German leader who praised the Iron Curtain and claimed it prevented a Third World War
How to turn your mobile phone into easy money

Turn your mobile phone into easy money

There are 90 million unused mobiles in the UK, which would be worth £7bn if we cashed them in, says David Crookes