G20 reaches agreement on indicators for inbalances

The G20 have reached a deal on indicators to detect economic imbalances, the French presidency said, after the meeting ended in Paris.

The world’s leading economies agreed on a compromise after “frank, sometimes tense” negotiations, French Finance Minister Christine Lagarde said.

The deal was agreed after softening criteria on current account surpluses to get China on board, reports suggest.

The aim is to co-ordinate policies more to avoid another economic crisis.

Ms Lagarde said there had been lengthy discussion on the indicators to be used, after reports that China, sensitive over its currency policy, had resisted the inclusion of some economic indicators.

“The negotiations were frank, sometimes tense, and led to a final compromise which cannot attribute to any one delegation but which I can say represents a spirit of compromise and of ambition,” Ms Lagarde told a news conference.

Currency reserves

China was said to be opposed to including the current account – which measures cash going in and out of the country as a result of trade and other activities – in the list of indicators.

Under the compromise, the current account will be on the list, but the measure will be adjusted to exclude the interest payments that China receives on its multi-trillion dollars-worth of foreign currency reserves, an official told AP news agency.

The indicators also include public debts and deficits and private debt levels and savings rates.

Two other measures that China objected to have also been excluded or watered down.

Other countries had wanted to include the “real effective” exchange rate, an indicator of how over- or undervalued a currency is, as well as the total value of a country’s foreign reserves.

Beijing has been accused by trading partners – particularly the US – of accumulating trillions of dollars of currency reserves in a bid to hold down the value of the yuan and give Chinese exporters an unfair trading advantage.

Some economists say that China and other “mercantilist” countries contributed to the 2008 financial crisis by accumulating excessive foreign currency reserves, especially US dollars.

Many Asian countries began building up their reserves in the wake of a crisis in 1997 that saw many of them forced to painfully devalue their currency.
Source: BBC