China finance talks target energy prices

High oil prices are among the biggest threats to the global economy and more needs to be done to increase oil production, refining capacity and investment, top financial officials of the world’s leading economies said on Sunday.

Wrapping up two days of meetings in the outskirts of Beijing, the Group of 20 (G20) major industrial and developing nations called for new strategies to fight poverty, lower trade barriers and promote global stability and growth by revamping international institutions such as the World Bank.

“Long-lasting high and volatile oil prices could increase inflationary pressures, slow down growth and cause instability in the world economy,” the gathering of finance ministers and central bankers said in a joint statement.

It said its members, who include both oil producing and consuming nations that account for 90% of all world economic activity, agreed to boost investment, production and refining capacities, increase oil market transparency and promote conservation and development of alternative energy sources.

Responding to appeals for help in salvaging troubled world trade negotiations, the group also said its members are committed to reducing “trade-distorting” subsidies for farm exports, providing trade support for developing nations and increasing aid to help improve poor countries’ ability to take advantage of export opportunities.

They said they are committed to “significantly” increasing market access for goods and services.

But with major members at odds over specifics on cutting tariffs and farm subsidies, it was unclear if such sentiments would be acted upon soon enough to ensure success at upcoming World Trade Organisation negotiations, to be held in Hong Kong in mid-December.

The G20 issued a separate statement calling for changes in the management and roles of the International Monetary Fund and World Bank, reflecting demands from developing countries for a greater say in those institutions, set up 60 years ago.

“As the world economy has changed, so too, these institutions must change,” said Peter Costello, treasurer for Australia, which took over the G20 chairmanship from China. Though the statement was an expression of intent, rather than policy, Costello described it as a “substantial breakthrough laying out a road map for reform”.

Talks with China

Just after the financial summit, a United States delegation headed by Treasury Secretary John Snow and Federal Reserve Chairperson Alan Greenspan began economic talks with China that were expected to put more pressure on Beijing to loosen controls on its currency—a topic that participants said was not raised in the G20 talks.

Officials said in Xianghe, a heavily guarded fortress-style resort an hour’s drive outside Beijing, that they also intended to intensify and broaden the debate over China’s economic reforms, urging to further development of domestic demand and financial services.

“If we truly want to deal with these imbalances bilaterally or multilaterally, you need to focus on more than just the currency,” US Treasury Undersecretary for International Affairs Tim Adams said on Saturday.

Christopher Cox, chairperson of the US Securities and Exchange Commission, said he hoped to work with Chinese officials to boost cooperation in strengthening China’s nascent financial markets.

“To the extent that China succeeds in building its capital markets, it will increase the size of the Chinese economy and the world economy as well,” Cox said before the US-China talks began.

The talks are part of an effort to redress the record trade gap between the two countries, which surged to $162-billion in China’s favour last year and is forecast to exceed that figure this year.

Critics of China’s currency policy contend the yuan is undervalued by as much as 40%, giving Chinese exporters an artificial price advantage, and that this is a major factor behind the trade imbalance.

Chinese officials say they cannot move any faster in currency reforms after having revalued the yuan by 2,1% in July, at the same time giving up a decade-old peg to the dollar and switching to a basket of major currencies that also includes the Japanese yen and euro. The currency has gained only about 0,3% in value since then.—Sapa-AP