Apec warns on rise in protectionism
Saturday, 4 August 2007
Peter Smith, FT Syndication Service
COOLUM: A rise in protectionist trade is a "serious threat" to growth and living standards in the global economy, warned a gathering of some of the world's most influential finance ministers.
One way to "dampen protectionist sentiment" was flexible exchange rates that are based on underlying economic fundamentals, according to finance ministers representing the 21 Asia-Pacific Economic Cooperation economies meeting in the Queensland resort town of Coolum on Friday.
Temasek, the Singapore state investment company and one of the biggest sovereign wealth funds in the world, this week warned that the investment climate could become tougher in the coming years as a result of rising protectionism in the US and Europe against state-owned funds.
Washington has recently pressed Beijing for a faster appreciation of the renminbi, while a number of Apec countries - notably South Korea and New Zealand - have voiced concerns about the impact of a weak Japanese yen and the effects of the yen carry trade.
Robert Kimmitt, deputy US treasury secretary, said there had been progress on currency issues at the talks, adding there was no difference between the US and China in the goal and direction of China's currency.
"The difference is in pace."
"It is in China's interest, first and foremost, the regional economy and the world economy, for China to move quicker to a currency that is valued based on underlying economic fundamentals and open competitive markets,'' Mr Kimmitt said.
His comments came after Hank Paulson, US Treasury secretary, this week visited China to discuss the value of the renminbi amid demands from some US Congress members for a faster appreciation of the Chinese currency in order to make US exporters more competitive.
However, Jin Renqing, China's finance minister, indicated the country would not be pressured, adding Beijing had already adopted a more flexible approach to its currency.
"The biggest problem for China is to maintain the good momentum in its economic growth," he said. "The reforms should be self-initiated, controllable and gradual.''
Mr Kimmitt declined to comment on the impact of the yen carry trade, where investors sell the low-yielding yen and buy into higher-yielding assets.
However, he said: "If you believe in free flow of capital, exchange rates and pricing mechanisms, you would trust the market to work out anomalies."
Koji Omi, Japan's finance minister, said that currencies should reflect the relative strengths of economies and that ministers had only had limited talks on the yen carry trade.
Both South Korea and New Zealand have been hit by the yen carry trade in recent months, with yield-hungry investors pushing their currencies to fresh highs.
Kwon O-kyu, South Korean finance minister, said the weak yen was "deepening global imbalances".
"Despite an economic recovery and a huge current account surplus in Japan, the yen has been weakening due to the carry trade, deepening global imbalances,'' he said in a statement after the meeting.
COOLUM: A rise in protectionist trade is a "serious threat" to growth and living standards in the global economy, warned a gathering of some of the world's most influential finance ministers.
One way to "dampen protectionist sentiment" was flexible exchange rates that are based on underlying economic fundamentals, according to finance ministers representing the 21 Asia-Pacific Economic Cooperation economies meeting in the Queensland resort town of Coolum on Friday.
Temasek, the Singapore state investment company and one of the biggest sovereign wealth funds in the world, this week warned that the investment climate could become tougher in the coming years as a result of rising protectionism in the US and Europe against state-owned funds.
Washington has recently pressed Beijing for a faster appreciation of the renminbi, while a number of Apec countries - notably South Korea and New Zealand - have voiced concerns about the impact of a weak Japanese yen and the effects of the yen carry trade.
Robert Kimmitt, deputy US treasury secretary, said there had been progress on currency issues at the talks, adding there was no difference between the US and China in the goal and direction of China's currency.
"The difference is in pace."
"It is in China's interest, first and foremost, the regional economy and the world economy, for China to move quicker to a currency that is valued based on underlying economic fundamentals and open competitive markets,'' Mr Kimmitt said.
His comments came after Hank Paulson, US Treasury secretary, this week visited China to discuss the value of the renminbi amid demands from some US Congress members for a faster appreciation of the Chinese currency in order to make US exporters more competitive.
However, Jin Renqing, China's finance minister, indicated the country would not be pressured, adding Beijing had already adopted a more flexible approach to its currency.
"The biggest problem for China is to maintain the good momentum in its economic growth," he said. "The reforms should be self-initiated, controllable and gradual.''
Mr Kimmitt declined to comment on the impact of the yen carry trade, where investors sell the low-yielding yen and buy into higher-yielding assets.
However, he said: "If you believe in free flow of capital, exchange rates and pricing mechanisms, you would trust the market to work out anomalies."
Koji Omi, Japan's finance minister, said that currencies should reflect the relative strengths of economies and that ministers had only had limited talks on the yen carry trade.
Both South Korea and New Zealand have been hit by the yen carry trade in recent months, with yield-hungry investors pushing their currencies to fresh highs.
Kwon O-kyu, South Korean finance minister, said the weak yen was "deepening global imbalances".
"Despite an economic recovery and a huge current account surplus in Japan, the yen has been weakening due to the carry trade, deepening global imbalances,'' he said in a statement after the meeting.