China has strongly opposed a US proposal to set up a cap on current account balances, saying such a measure may not resolve global economic imbalances, and is unfair to emerging economies.
Chinese officials attending the G-20 summit along with President Hu Jintao said that the US proposal capping the ratio of current account balances to four per cent of a nation's gross domestic product (GDP) was strongly opposed by both advanced and emerging nations.
"As in the case of other emerging markets, China will not agree to a target that cannot solve global economic imbalances," Chen Xu, director-general of the Ministry of Foreign Affairs' department of international organisations and conferences said, as reported in China Daily.
Chen said, "It is unrealistic to set a specific target, since there are wide divergences among the economies of the G20 member nations, as well as a wide range of sources to the global imbalances," he added, "A target would also be unfair to developing and emerging economies if it was the result of a political demand by some developed nations."
Zheng Xiaosong, director-general of the international department of the Ministry of Finance said, "The problem is a result of globalisation, which is related to trade imbalances, capital flows as well as some improper policies adopted by the developed countries".
Referring to the US Federal Reserve Board decision to resort to quantitative easing to print $600 billion in treasury bonds to rescue its ailing economy, he said, "When a reserve currency country adopts a policy, it should take into account not only its national economic interest, but also bear in mind its impact on the global economy".
Zhang Tao, head of the international department of the People's Bank of China, said the US policy will have a major impact on emerging market economies, including China; though the country has the capacity to absorb financial shocks triggered by massive capital inflows.
"We will use existing measures for capital inflow management and make flexible adjustments to make the policy better targetted and more flexible," he said.
Reducing the risk of a currency war is another major topic at the summit. During a meeting with his US counterpart Barack Obama, President Hu said China's foreign exchange reform will be a gradual process. Hu also said China will remain unswerving over the yuan's reform.
