David Cameron flies in for G20 after China speech

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The Independent Online

David Cameron today flew into South Korean capital Seoul for a meeting of leaders of the G20 group of major economies at which he has vowed to fight protectionism and support measures to keep the recovery on track.

The Prime Minister flew in from Beijing, where he added to pressure on China to allow swifter appreciation of its currency to correct imbalances in world trade.

Mr Cameron also risked infuriating his Communist hosts in a speech to students in which he sang the praises of parliamentary democracy and a free press, and said he hoped China would in time move towards "a greater political opening".

The under-valuation of the yuan is likely to be the focus of wrangling at the G20 summit, with consumer nations like Britain and the US arguing that the massive foreign currency reserves which China has built up on the back of export success are a danger to the fragile world economy.

Speaking at Peking University earlier today, Mr Cameron warned of "a dangerous tidal wave of money" sweeping around the world.

At a time of slow growth and high unemployment, there was a danger of states turning to protectionist measures which could damage the recovery, he warned.

"Globalisation - the force which has been so powerful in driving development and bringing huge numbers into the world economy - could go into reverse," said Mr Cameron.

"If we follow that path, we will all lose out. The West would lose for sure, but so would China."

China's increasing economic muscle has given it "responsibilities" both economically and politically, said the Prime Minister.

And he warned: "The truth is that some countries with current account surpluses have been saving too much while others, like mine with deficits, have been saving too little.

"And the result has been a dangerous tidal wave of money going from one side of the globe to another.

"We need a more balanced pattern of global demand and supply, a more balanced pattern of global saving and investment."

It was also necessary for China to make moves to encourage domestic consumption, such as investing in health care and welfare, so that its growing middle classes do not feel obliged to save their money for a rainy day but can instead buy the luxury goods and services which Western nations want to export, he suggested.

"China is already talking about moving towards increased domestic consumption, better healthcare and welfare, more consumer goods as its middle class grows, and in time introducing greater market flexibility into its exchange rate," said Mr Cameron.

"This cannot be completed overnight but it must happen."

Mr Cameron's speech featured the most forthright exposition of the merits of democracy to be made by a British Prime Minister on Chinese soil in recent years.

The PM has said he did not want to "hector and lecture" his Chinese hosts.

But he pointedly described how political decision-making was improved by democratic elections and the existence of an opposition with the constitutional duty to hold the government of the day to account.

Mr Cameron accepted that Britain's society was "not perfect" and insisted he was not trying to claim a position of "moral superiority".

But he said that Britain's democratic traditions "make our government better and our country stronger".

And he said he hoped that "in time", China's rise in economic freedom "will lead to a greater political opening, because I am convinced that the best guarantor of prosperity and stability is for economic and political progress to go in step together".

Mr Cameron is understood to have raised the detention of Nobel Peace Prize winner Liu Xiaobo at a banquet hosted by Premier Wen Jiabao last night.

And today he insisted that his focus on promoting trade with China would not lead him to shy away from raising "sincere and deeply held" human rights concerns.

Mr Cameron said he wanted "a strong relationship with China. Strong on trade. Strong on investment. Strong on dialogue".

Deals worth around £2 billion between British and Chinese companies are believed to have been sealed during the two-day visit, including a £750 million Rolls-Royce agreement to supply engines to one of China's major airlines.

Mr Cameron, who was accompanied by 43 business leaders on what he termed a "vitally important trade mission", said he hoped the deals would be "just the beginning of a whole new era of bilateral trade between our countries".

He added: "If China is prepared to pursue further opening of its markets and to work with Britain and the other G20 countries to rebalance the world economy and take steps over time towards internationalising its currency, that will go a long way towards helping the global economy lock in the stability it needs for strong and sustainable growth.

"And just as importantly, it will go a long way in securing confidence in the global community that China as an economic power is a force for good."

Mr Cameron also urged China to play a constructive role on international issues such as climate change, Africa, the nuclear ambitions of Iran and North Korea, stability in Sudan and the disputed elections in Burma.

Ahead of the opening of the G20 summit tomorrow, Mr Cameron will take part in bilateral talks with South Korean President Lee Myung-bak and ceremonies to mark Remembrance Day.