Rise of the RMB

Views from the summit

China returns from Toronto with a revalued currency. But no one is allowed to mention it…

Don’t mention the yuan…

Our currency policy is our own business, and not a topic for discussion at international summits like the G20, the Chinese media insisted. And as usual, the Global Times was ready with a few home truths. China had more than done its bit for the global recovery and was fed up with all of the “finger pointing,” it bristled. Americans “owe China $3,000 each” and China wants to know how it is going to be repaid.

A sentence mentioning Beijing’s currency policy switch last week was even removed from the final record, foreign media reported. “Our Chinese friends didn’t like to be singled out within the communiqué,” French president, Nicolas Sarkozy explained.

That didn’t stop President Obama from voicing expectations post-conference that the renminbi would “go up significantly” in the months ahead. “No nation should assume its path to prosperity is paved with exports to America,” Obama went on. “A strong and durable recovery also requires countries not having an undue advantage”. No prizes for detecting the subtext there…

Each country to do its own thing…

Beijing’s insistence on sovereign decision-making was in sync with the rest of the Toronto gathering, which saw G20 members choose their own paths back to economic health. But China still joined Canada, Australia and Japan in opposing a banking levy proposed by Washington and the Europeans. “The best way to prevent a repeat of any financial crisis in the years to come is to raise the regulatory standard,” Zheng Xiaosong at the Ministry of Finance told the China Daily.

The other achievement in the summit declaration, said Xinhua, was the recognition of the need to reform voting rights at the World Bank and the International Monetary Fund.

Previous G20 summits had shown much more of a common purpose, the New York Times thought. “When the house was on fire we all knew what to do: get a hose,”remarked Angel Gurria, head of the OECD.

Now that the threat of financial collapse had receded, differences of opinion are resurfacing. The Europeans see fiscal tightening as the priority, reported the South China Morning Post in Hong Kong, while the Americans are more concerned about a double-dip recession. So the final communiqué was fudged, calling for deficit reduction “tailored to national circumstances.”

But agreement that the 20 has displaced the G8 as the world’s key forum?

The days of the G8 countries having final say on the world economy are pretty much history, opined the Global Times. Whether the developed nations like it or not, emerging countries have found their place on the world stage.

Quite right, thought Xinhua, as the financial crisis has supercharged the G20’s importance. Naturally, China is now “looked-up-to”, a position earned for its “leading if not exemplary role” during the economic recovery.

Charles Kupchan at the Council of Foreign Relations agreed that most of the multilateral institutions reflect a post-World War Two world, and are in need of reform. That would mean “a lot more chairs around the table.” The UK’s Daily Telegraph wondered if that would make finding consensus a lot more difficult.


© ChinTell Ltd. All rights reserved.

Exclusively sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.