G20 Talks in China
In their defense, China indicated their concern in regard to stimulus policies that have been set in place by the United States, which they argue are increasing commodity price surges. Looking at the present crises facing Japan after the horrific earthquake they endured, Nicolas Sarkosy, the French President, commented: “It is clear that we must evolve toward a more flexible exchange rate system that will allow us to withstand shocks.” He went on to say: “Now that the crisis is past, the temptation to not act is very strong. If we lose the impetus that we achieved during the crisis then the world will slide inexorably back into instability and crisis.” Sarkozy will be visiting Japan to extend the support of the G20.
Xu Hongcai, an economist at the China Center for International Exchanges, published a piece relating to the major reserve currency, on a global scale, being the U.S. dollar and was quoted writing: “The U.S. Federal Reserve acts without any constraints, adding to the lack of stability in the global monetary system and also its unfairness. Only the United States can have an independent monetary policy and other countries must follow.”
Timothy Geithner, the Treasury Secretary of the United States, agreed with Sarkozy’s plea to have the yuan move towards becoming a global reserve currency, but noted that it need more freedom to trade to achieve these goals. He did comment on emerging economies by saying: “The major currencies are all flexible, with essentially full capital mobility. Most major emerging economies now operate largely flexible exchange rate regimes, with very open capital accounts.” Geithner also agreed that international currencies that participate in global trade must become a part of the SDR. To obtain this, he added that countries should allow independent banks to operate, make their exchange rate systems more flexible and provide more freedom to the flow of capital. China, however, still shows resistance on allowing their currency to appreciate and is opposing the suggested exchange rates.