G-20 Seoul Summit 2010

for EU summit (SERI)

2010-11-18T22:19:00.000-08:00

Goal and accomplishments at past G-20 Summits - JungAng daily- 11.12.2010

2010-11-11T17:00:00.000-08:00

Goals and accomplishments at past G-20 Summits:Washington D.C.

November 12, 2010

* Date: Saturday, Nov. 14-15, 2008

* Participants:

-G-20 members: G-8 + Korea, China, India, Australia, Brazil, Mexico, Indonesia, Argentina, Turkey, Saudi Arabia, South Africa, EU (Spain, Netherlands)

-International Organizations: UN, IMF, World Bank, Financial Stability Forum

The leaders from the G-20 countries, which represents 85 percent of the world’s economic output, met in Washington to mark the first-ever G-20 Summit. The group was to discuss the root causes of the global financial crisis and to review actions taken afterward. Among other agenda items were a commitment to fend off protectionism and reform financial regulations.

It was the first time that the G-8 nations and 12 other countries came together for a common goal. The meeting began with a realization that global collaboration was needed to overcome the crisis and that the G-8 was insufficient to solve the problems.

It was perhaps the biggest gathering of presidents and prime ministers in almost a decade.

The summit’s outcome included strengthening policy cooperation among the G-20 nations in areas such as monetary policy to stimulate the real economy; reforming financial markets by strengthening transparency and accountability; and reforming international financial institutions.

The nations agreed that they would work to increase IMF resources and facilitate early-warning exercises to improve the fund’s ability to respond effectively to financial crises.

They also decided to enhance the status of emerging and developing countries in international organizations, such as the IMF and World Bank and other multilateral financial institutions, to reflect the changing economic weight of emerging countries.

They agreed to pursue more spending on green growth and other areas of sustainable development.

Goals and accomplishments at past G-20 Summits:London

November 12, 2010

* Date: Thursday, April 2, 2009 * Participants:

-G-20 members: G-8 + Korea, China, India, Australia, Brazil, Mexico, Indonesia, Argentina, Turkey, Saudi Arabia, South Africa, EU (Czech Republic)

-Invited: Spain, Netherlands -International Organizations: Asean, Nepad, WTO, UN, IMF, World Bank, Financial Stability Forum

The London summit was held at a time when the global economy was experiencing its worst crisis since World War II. Building on the results of the Washington summit, the leaders aimed to again discuss ways to take collective action toward economic recovery and job creation.

Among the major agenda items were to take efforts to restore economic growth and employment recovery and to inject an economic stimulus of $5 trillion by the end of 2010; to pursue reform and reinforcement of financial supervision and regulations to prevent another “too-big-to-fail” problem; and to avoid protectionism and promote international trade and investment.

At the end of the summit, the leaders sent out a communique that was divided into three main topics: strengthening the financial system, establishing funding through international financial institutions, and reporting on the implementation of action plans.

They decided to pursue coordinated expansionary fiscal policy for economic and employment growth. The role of the IMF was expanded to include surveillance and early warnings. The countries agreed to seek regulatory reform and to dispose of nonperforming assets to eliminate future uncertainties. The Financial Stability Forum (FSF) was re-established as the Financial Stability Board (FSB).

They also decided to adopt practical measures to avoid protectionism and to give out $1.1 trillion for emerging and developing economies to help them recover from the global financial crisis.

Goals and accomplishments at past G-20 Summits:Pittsburgh

November 12, 2010

* Date: Thursday, Sept. 24-25, 2009 * Participants:

-G-20 members: G-8 + Korea, China, India, Australia, Brazil, Mexico, Indonesia, Argentina, Turkey, Saudi Arabia, South Africa, EU (Sweden)

-Invited: Spain, Netherlands

-International Organizations: Asean, Nepad, WTO, UN, IMF, World Bank, Financial Stability Forum

At the Pittsburgh G-20 Summit, leaders reviewed the progress made since the Washington and London.

The Pittsburgh summit produced a victory for emerging economies with an agreement to turn the G-20 Summit into an annual event and a major arena for discussing the global economy, thereby replacing the G-8 format.

Among the agenda items were pursuing exit strategies with international collaboration once economic recovery is certain, consent on the foundation of a collaborative system for strong, sustainable and balanced growth, and reform of international financial regulations.

During the summit, the United States and Europe narrowed differences on issues including limiting salaries for bankers, which Europeans pushed strongly for. The U.S. initially wanted to deal with the issue by backing higher capital requirements rather than limiting salaries.

One of the outcomes of the summit was to meet in Canada in June 2010, Korea in November 2010 and France in 2011.

The members also agreed to meet annually starting in 2011.

One of the major achievements at the summit was reform of international financial institutions. G-20 members committed to shifting at least 3 percent of voting power from developed to developing countries.

G-20 members agreed to reform compensation practices at financial firms and in over-the-counter derivatives markets.

Goals and accomplishments at past G-20 Summits:Toronto

November 12, 2010

* Date: Saturday, June 26-27, 2010 * Participants:

-G-20 members: G-8 + Korea, China, India, Australia, Brazil, Mexico, Indonesia, Argentina, Turkey, Saudi Arabia, South Africa, EU (Belgium)

-Invited: Spain, Netherlands, Nigeria

-International Organizations: African Union, Asean, Nepad, WTO, UN, IMF, World Bank, Financial Stability Board, International Labour Organization, OECD

At the Toronto summit, Korea contributed greatly to elevating the creation of global financial safety nets as a major agenda item for further discussion, especially at the Seoul summit. The IMF decided to increase the duration and credit available under the existing Flexible Credit Line for member countries with strong economic fundamentals and policies. It also created the Precautionary Credit Line for members with sound economic policies but that don’t meet the FCL’s more stringent requirements.

Among the major agenda items were advanced economies pursuing fiscal consolidation to reduce debt, upgrading regulations on bank capital and liquidity, and reforming IMF quotas.

The G-20 members promised to halve their deficits by 2013 and stabilize or reduce government debt-to-GDP ratios by 2016. They also decided to safeguard and strengthen the recovery, lay the foundation for strong, sustainable and balanced growth and strengthen financial systems against risks. But they failed to reach a consensus on creating a bank levy, leaving the issue to be decided by each country.

They agreed to address global economic imbalance, which could be the biggest agenda item in Seoul. They also agreed that advanced deficit economies should take action to boost national savings while advanced surplus economies should focus on structural reforms that support increased domestic demand. It was also the first time the issue of exchange rates was mentioned.

g20 summit-regular gathering

2010-11-10T17:45:00.000-08:00

(G20) summit-regular gathering

(G20) Seoul summit to help solidify G-20 as regular gathering

SEOUL, Nov. 11 (Yonhap) -- The Seoul summit of the Group of 20 major economies is expected to establish the G-20 as a regular gathering of leaders to handle key global economic issues and set rules for sustainable growth, government sources said Thursday.

The local summit preparation committee and the finance ministry said there is a good chance that G-20 leaders will announce a move to hold a summit meeting on a regular basis like the G-7 meeting of advanced industrialized economic, the Asia-Pacific Economic Cooperation and the Asia-Europe Meeting.

"The G-20 has already established itself as a 'premier forum' for economic issues, and since host countries for the 2011 and 2012 summits have been set, there is wide support for the meeting to be held regularly in the future," a government official said.

Originally, the G-20 was a gathering of finance ministers but gained prominence when leaders met in Washington in November 2008 to tackle the global financial crisis triggered by the collapse of U.S. investment giant Lehman Brothers earlier in the year.

Leaders from the Group of 20 advanced and emerging economies and international organizations such as the United Nations have since met in London, Pittsburgh and Toronto, during which the G-20 has proven its worth by handling both crisis situations and helping to lay the foundation for how the global economy should grow in the future.

"The summit has shown it can solve critical problems not only in times of crisis, but in a post-crisis environment as shown by the agreement reached during the Gyeongju finance ministers meeting last month when members moved to prevent the currency issue from getting out of hand," he said.

To turn the G-20 summit into a regular gathering, efforts are underway to create a permanent secretariat. At present, the G-20 does not have a permanent secretariat, and host countries take turns coordinating the summit and various agenda items.

Initially, there were calls to operate an "online secretariat" that may be built up into a more permanent body in the future.

In addition to the G-20 summit, officials here said that efforts are underway to institutionalize the G-20 Business Summit so that it can be held alongside the meeting of global leaders.

France has already said it wants to hold a gathering of entrepreneurs similar to meetings held in Seoul. Businessmen can coordinate their agendas with government officials to tackle issues facing the global economy, they said.

yonngong@yna.co.kr

(END)

Briefing by Minister of Culture, Sports and Tourism Yu In-chon

2010-11-10T03:53:00.000-08:00

Briefing by

Minister of Culture, Sports and Tourism

Yu In-chon

1. Korea’s Bid to Host International Sporting Events

2018 PyeongChang Olympic Winter Games

2022 FIFA World Cup

2. Revitalization of International Exchanges

and Cooperation in Culture, Tourism and Sports

November 10, 2010

Ministry of Culture, Sports and Tourism

Korea’s Bid to Host International Sporting Events

2018 PyeongChang Olympic Winter Games

Background

The Republic of Korea has been trying to host the Olympic Winter Games in PyeongChang with a view to spreading winter sports across Asia. PyeongChang has been selected as one of the candidate cities for 2018 Winter Olympics along with Munich in Germany and Annecy in France. It was also chosen consecutively as a candidate city for the 2010 and 2014 Games.

If PyeongChang’s bid turns out to be successful, it would be the second Olympic Winter Games to be held in Asia in 20 years; the Nagano Games were in 1998. Out of 21 Winter Olympics in history, only two Games were held in Asia. It is expected that the PyeongChang Olympic Winter Games would contribute to further spreading the spirit of the Olympic Movement in Asia where winter sports are not commonplace and present a new opportunity for expanding their growth potential.

PyeongChang, a Fully Prepared Venue

PyeongChang is set to emerge as a hub of winter sports in Asia. Every year, some 1.5 million foreign tourists visit PyeongChang to enjoy winter sports, and it is expected to become a magnet for travelers from nearby countries, whose sports population reaches more than 1 billion. About 91 percent of Koreans support the hosting of the Winter Olympics, and the Korean Government has reaffirmed its commitment to carrying out the guarantees it has made to the IOC. Korea’s past track record of having successfully held international and domestic sporting events scores of times, including the 1988 Seoul Olympics, will be conducive to the success of the PyeongChang Winter Olympics.

PyeongChang is equipped with world-class facilities and infrastructure for the Winter Games. Alpensia Resort, a large-scale Olympic complex, had its grand opening in July 2010 after construction work with a total investment of US$140 million. Of the 13 cutting-edge facilities planned for the competitions, seven of them, including a ski jump tower and the biathlon and cross-country skiing courses, have been completed along with a media village and a hotel to house the IOC head quarters. An efficient Games plan has also been put in place. All competition venues in the Alpensia Cluster and the Coastal Cluster can be reached within 30 minutes from PyeongChang. All venues for the competitions will be accessible within 5 to 10 minutes from the Olympic Villages by expressway, national highway or railroad.

In addition, Korea has made continuous efforts to contribute to the development of winter sports. For instance, the Dream Program, which began in 2004 as part of the pledge made to the IOC, has brought together 806 young people from around 42 countries that do not have snow at any time of the year. Among them, 12 young athletes competed in international sporting events, including the 2010 Vancouver Olympic Winter Games. This kind of endeavor has gone a long way toward spreading the spirit espoused by the IOC.

Korea’s Bid to Host the 2022 FIFA World Cup

Background

The Republic of Korea has submitted a bid to host the 2022 World Cup aimed at realizing the common benefits of humanity pursued by FIFA and further spreading an enthusiastic passion for football in Asia, which accounts for nearly two thirds of the global population. On May 14, 2010, the Korean Government tendered a Bid Book to FIFA, and subsequently FIFA sent a survey delegation to Korea July 22-25, 2010 to study the competition venues and facilities. If Korea, the host of the G20 Seoul Summit, succeeds in its bid, it will become a beacon of new hope for many underdeveloped countries.

Benefits of Korea’s Hosting the 2022 FIFA World Cup

The principles of coexistence and prosperity of all peoples and the lasting social legacy FIFA is emphasizing is in perfect harmony with Korea’s three legacies.

Korea’s Three Legacies

Legacy of Inspiration: Korea has been an inspiration to other countries by achieving economic advancement and democratization rising above poverty, war and national division.

Legacy of Peace: The World Cup in Korea would contribute to promoting peace on the Korean Peninsula, the only remaining country divided by Cold War rivalries, and in Northeast Asia and beyond.

Legacy of Passion: The passion of Koreans for football evidenced during the 2002 World Cup, which Korea cohosted, evolved into the FIFA Fan Fest around the world.

Korea has built the best football infrastructure coupled with an advanced IT environment, which attest to the country’s capabilities to host the largest international football event.

For the 2022 World Cup, 12 candidate cities across the country have already been operating 14 state-of-the-art stadiums. On top of that, Korea’s capabilities to host the event have been objectively acknowledged through its experience and know-how in successfully cohosting the 2002 World Cup and hosting other international sporting events, its rapid and safe transportation networks and the state of reliable public security.

Korea has shown a strong commitment to the progress of football across the globe through a variety of efforts, including the raising of a global football development fund. If Korea succeeds in its bid to host the 2022 World Cup, it will strive to set up a development fund worth US$77.7 billion from 2011 to 2025 to provide assistance for developing nations that lack a quality football environment and infrastructure.

Revitalization of International Exchanges and Collaboration in Culture, Sports and Tourism

Overview

Korea will enhance efforts to help peoples across the globe better understand Korean culture and engage in cultural exchanges and cooperation in line with principles of cultural relativity and diversity. By assisting developing nations, which are partners in shared progress, to conserve and utilize cultural assets, Korea will help maintain their cultural identity and generate economic value added.

At a time when more than 10 million foreign tourists are expected to visit Korea annually, the domestic tourism industry is making contributions to mutual, sustainable growth by holding the T20 Tourism Ministers’ Meeting and carrying out various projects with the WTO.

International sports interaction is being vitalized in the course of holding friendly matches, assisting developing nations to participate in global events and expanding agreements for exchanges.

Current State

Culture

An increased number of Korean cultural centers, hubs for cultural exchanges, was set up across the globe, thereby establishing networks with numerous countries. In 2009, the number of the centers stood at 12 in nine countries; it soared to 20 in 16 nations in 2010 and will increase to 23 in 19 countries in 2011.

Current State of Hallyu

In the initial stages, the enthusiasm for Hallyu, the Korean Wave of popular culture, including TV broadcasts, music, films and games, mainly spread to East Asian nations. Recently, the phenomenon has started to be felt in North America, the Middle East and Central Asia. Korean digital game businesses are leading the world, boasting the second largest market share.

The dissemination of the Korean Wave has a significant ripple effect, which in monetary terms amounted to 4.9 trillion won or US$4.3 billion as of 2008. For instance, the export of content has gradually increased from US$1.2 billion in 2005 and US$1.5 billion in 2007 to US$1.9 billion in 2008. On top of this, the number of tourists who visited Korea increased to 7.81 million in 2009 from 5.81 million in 2004. As a result, more and more people have come to have favorable views about Korea.

Korea has made efforts to bolster international cooperation through official development assistance projects in culture. As part of such efforts, Korea has run invitational training programs for those involved in the cultural sector in developing nations. From 2005 to 2009, with a budget of 10 billion won or US$8.9 million, it invited a total of 500 people from 37 countries in Asia, South America and Africa. In 2010, with a budget of 1.5 billion won or US$1.3 million, it invited a total of 74 people from 35 nations.

Under the project dubbed “Thank You, Small Library,” Korea has assisted developing nations to set up libraries. From 2007 to 2010, a total of 17 libraries was founded in Ghana and Mozambique. In 2011, Korea plans to build ten additional libraries on the African continent.

Korea has provided Funds-in-Trust to the United Nations Educational, Scientific and Cultural Organization (UNESCO) and the World Intellectual Property Organization (WIPO). It donated US$300,000 to UNESCO in 2007 and US$250,000 in 2009. Every year since 2006, Korea has provided WIPO with about US$214,000.

From 2007 to 2009, Korea provided Vietnam and Mongolia with about 300 million won or about US$268,000 for the management and preservation of cultural assets and historic sites. It also carried out joint academic research projects.

The 2^nd UNESCO World Conference on Arts Education

The Conference was held in the Convention and Exhibition Complex (COEX) in Seoul May 25-28 this year. The number of participants from 107 countries reached about 3,000, including the UNESCO Director-General, minister and vice minister-level officials from 17 nations and professionals in the arts and culture.

The main outcome of the Conference was the adoption of the Seoul Agenda: Goals for the Development of Arts Education. Among other things, the goals were mainly to “ensure that arts education is accessible as a fundamental and sustainable component of a high quality renewal of education,…assure that arts education activities and programmes are of a high quality in conception and delivery” and “apply arts education principles and practices to contribute to resolving the social and cultural challenges facing today’s world.”

As part of follow-up measures to the Seoul Conference, the UNESCO Executive Board adopted the recommendations for the implementation of the Agenda of the Conference and decided to declare the last week of May every year to be an arts education week. The designation will be officially announced following its adoption at the UNESCO General Conference in October 2011.

Tourism and Sports

Two-way international tourism has expanded considerably. During 2010, international tourists visiting Korea are estimated to reach 8.5 million and the number of Koreans heading overseas 12 million. This contrasts with the 2009 figures when inbound tourists reached 7.81 million and outbound tourists 9.5 million.

To celebrate the G20 Seoul Summit, the T20 Tourism Ministers’ Meeting was held in Buyeo, Chungcheongnam-do (South Chungcheong Province) October 11-13, 2010. The participants agreed that tourism policies should contribute substantially to sustained shared growth. They pledged to encourage both developing and industrialized countries to help each other so that both can benefit on an equitable basis.

The Ministers’ Meeting adopted the T20 Buyeo Declaration and referred it to the President of the Republic of Korea, the chair of the 2010 G20 Seoul Summit. France, the chair of the next G20 Summit, was designated as the host of the next T20 Ministers’ Meeting.

Gist of the T20 Buyeo Declaration

Member countries will strive so that tourism will help contribute to overcoming the global economic crisis and to sustained and balanced growth throughout the world. They took note of the fact that tourism yields 5 percent of the GDP and 6-7 percent of jobs worldwide. Tourism accounts for 30 percent of the countries’ service exports totaling US$1 trillion annually.

Member countries will contribute to further promoting tourism traffic, creation of new jobs and green growth.

The members will do their best to mitigate the gaps in tourism through fair tourism and transfer of technologies. Fair tourism or responsible tourism denotes among other things that countries will refrain from developing tourism resources aimed at attracting travelers from industrialized countries in a lopsided fashion. It also provides that tourism will not result in undue damage to the residents of the tourist sites. It was also decided that Korea would host the 19^th UNWTO General Assembly.

Members affirmed their need to establish a strong, cooperative relationship with international organizations, including the World Tourism Organization (UNWTO), the International Labor Organization (ILO), the United Nations Conference on Trade and Development (UNCTAD) and the International Trade Center (ITC).

Since 2008, the Korean Government and other international organizations have been building a special partnership with the UNWTO to carry out Sustainable Tourism—Eliminating Poverty (ST-EP) Projects in 14 developing countries.

Some Details of the ST-EP Projects

(In thousand US dollars)

Year	Budget	Target Countries	Project Contents
2008	US$715	Ghana, Ethiopia, Kenya, Mozambique, Rwanda, Tanzania, Honduras, Nicaragua, Ecuador, Peru, Bolivia, Albania, Cambodia and Nepal.	In Bolivia and Peru, projects focused on strengthening community-based tourism. In Nicaragua, bigger tourist businesses were matched with smaller ones for mutual collaboration. In Ecuador, attention was given to comprehensive development of resources, including nurturing community-based tourism in rural areas.
2009	US$697
2010	US$625

Note: Korean support for the projects is for 2008-2010

Further instances of Korea’s international cooperation include the conclusion of an MOU with Ghana in October 2010 for the installation of tourist guide information signs. Some 35 such signs were put up in 10 Ghanaian districts using a budget of US$330,000 offered by the Korean Government.

Cooperative projects by the Korean Government are often conducted in tandem with the WTO and the OECD Tourism Committee. Through these programs, the country invites 25 mid-level government officials from 20 Asia-Pacific countries every year. It occasionally invites trainees from ASEAN members for tour guide education.

The Korean Government has been proactive in concluding tourism agreements. Up to November 2010, the Republic had signed tourism MOUs with 28 countries. As of the date, it is negotiating bilateral arrangements with 8 other countries.

The Korean Government is placing priority on promoting low-carbon, green tourism as part of fulfilling its climate change obligations. Its goal is set at a 30 percent reduction of the country’s expected green house gas emission by the year 2020. The Korean Government enacted the Framework Act on Low-Carbon, Green Growth in January 2010, making the country the first in the world to do so.

Government policy stipulates the intensive control of carbon emissions at large tourist sites and amusement parks as a means of fostering eco-tourism. The objective is to preserve the environment and create more jobs. For instance, the Suncheon Bay special ecotourism project attracted 2.3 million visitors during 2009, adding 6,400 new jobs.

Korea has expanded international sports exchanges and supported athletic training for those coming from developing countries. The number of Korea-sponsored games was 29 in 2008, 30 in 2009, and 30 in 2010. Meanwhile, instances of athletic exchange projects increased from 12 in 2008, to 13 in 2009, and 14 in 2010. Instances of training athletes from developing countries ranged from 33 in 2008, to 43 in 2009, and to 39 in 2010.

The Korean Government designated taekwondo as a core sports for training in developing countries. The program provides taekwondo supplies, training in Korea and training by Korean masters in specified countries as well as dispatches demonstration teams. The Government has appropriated 2.98 billion won or US$2.6 million to be used in 95 countries for that purpose from 2008 through 2010.

The Korean Government’s Vision for the Future

The Korean Government will continue to expand its international cooperation programs in the area of culture, sports and tourism. Its contribution will be bolstered so that it would be worthy of a country that sits on the Development Assistance Committee of the OECD as one of a dozen leading economies of the world. What is so unique about the role of Korea is that it is perfectly qualified to serve as a bridge linking developing and developed countries. The Korean Government is ready and willing to lead international efforts to boost the potential for green growth worldwide in all areas of common interests, including tourism and other culture industries.

미디어센터

2010-11-09T22:22:00.000-08:00

각 정상들이모이고 환률과 균형성장, 개발국에 대한지원, IMF의 지분율, Green energy등 세계경제의 모든 흐름을 결정지을 2010 G-20 Summit이 코엑스에서 열린다. 현재는 삼엄한 경호속에 재무차관회의와 Sherpa회의가 한창 진행중인 세계의 심장부, 서울의 회의장소에 내가 발을 들일 수 있다는 것 그리고 그를 취재하는 세계의 유수의 언론사들의 기자들과 같은 자리에서 모든 소식을 접할 수 있다는 것은 국제관계를 전공하는 학생으로 흔치 않은 기회이기에 사뭇 다른 흥분은 G20 출입등록소에서 출입증을 받아들며 실감할 수 있었다.

중앙일보측에서 나온 두분의 기자분들과 1시에 만나기로 약속을 한지라 같이 나와함께 y20에 참석했던 맴버들을 12시 45분에 정문에서 만나기로해 출입증을 받은 행복함을 가라앉히고 입구로향하였다.

검색이 끝나고 안으로 들어가자 코엑스 내부는 주변의 삼엄한 경호와는 다르게 평화로워보였다.

팀원들이 모이고 만나뵙기로한 기자분들이 있는 미디어센터에 들어섰다. 한번 더 출입증 확인을하고나서 들어선 미디어센터는 전세계의 관심의 정도를 대변하듯 엄청난 규모였다. 아직 각국의 정상들이 도착하지 않은 상황에서 앞으로 있을 정상회의 취재를 준비하며 약간은 숨을 고르는 분위기이다.

잠시 뒤 중앙일보기자 두분이 우리를 맞이하여주셨고 브리핑실을 지나서 취재진들이 기다리는 동안 잠시 휴식을 취할 수 있게 마련된 라운지에 들어섰다.

라운지에서는 커피를 기다리며 안면있는 기자들간의 간단한인사를 건네는 모습이 취재시 앞다투어 뛰어나가는 경쟁자들의 모습보다는 오랜 친구들을 만나는 듯한 모습들이였다.

기자분들의 자세한 설명을 듣고나서야 조금씩 시야에 미디어센터의 전체적인 모습이 들어오기 시작하였다.

한국의 한 기업의 지원으로 만들어졌다는 초대형 화면이 한쪽편에 놓여있었다. 영문으로 들어간 설명으로보아 한국을 방문한 외신기자들에게 한국을 알리고자 만들어진 것을 알 수있는 영상은 외신기자들 뿐만아니라 한국인인 나로서도 한국의 아름다움에 감탄하지 않을 수 없었게하였다.

웅장하면서도 세심하게 제작된 영상을 보고나서 주변에 비치된 책장을 보았다. 한국을 대표하는 문학작품들이 여러나라 언어로 번역되어있었고 한국에 대한 전반적인 이해를 돕는 책자들이 모여져있었다. 꼭 보고싶은 책들이 있어 가져가고 싶은 마음이 들었다. 잠시 쉬는동안 읽어보라고 비치된 책자이겠지 싶어 가져갈 엄두를 내지 못하다가 혹시나하는 마음에 안내 데스크에 물어보았다. 대답은 의외였다. 비치된 책들은 원하면 가져갈 수 있다는 대답을 들었다. 원하던 책을 가져갈 수 있다라는 즐거움이 생기기도 전에 한국을 방문한 외국인들에게 조금이라도 한국의 아름다움과 발전을 전하기위해 준비된 모든 것들이 체계적으로 준비되었다는 것에 나는 또 한번 감탄할 수 밖에 없었다.

안내데스크는 각국의 언어를 구사하는 진행요원들이 상주하고있었으며 기사를 작성할 데스크위에는 동시통역시 필요한 리시버들이 가지런하게 놓여있었다. 자원봉사로 온 학생들도 단정하였으며 하루종일 서있어 다리가 아플텐데도 불구하고 모든사람들에게 웃음을 잃지 않았다.

처음 내가 출입증을 받고 세계의 중심지에 발을 들일 수 있다는 설레임은 미디어센터안에 하나하나 세심히 준비된 모습들을 보며 의장국으로서 외국인에 비칠 한국의 모습에 대한 자부심으로 바뀌고 있었다.

오늘 내가 본 미디어센터는 세계로 퍼져나갈 국제적인 사안에 대한 소식을 보내는 곳이 아니며 의장국의 위세를 들어내는 것도 아닌 한국의 참모습을 보여주는 준비된 곳이였으며 한국인으로서의 자부심을 느낄 수 있던 곳이였다.

G-20 Currency Agreement to Agree Collapses Already

2010-10-28T06:08:00.000-07:00

So much for the G20's agreement to agree on currencies. South Korea, Indonesia, Columbia, Thailand, Brazil and now Europe and South Africa are all bitching about the strength of their currencies.

Every Man for Himself

Bloomberg says it's ʻEvery Man for Himselfʼ on Currencies After G-20

Wednesday, October 27, 2010 .

Finance chiefs from South Korea to South Africa signaled they may act to slow gains in their currencies, just four days after the Group of 20 vowed to soothe trade tensions in the $4 trillion-a- day foreign-exchange market.

Asian currencies fell to a one-week low after Bank of Korea Governor Kim Choong Soo said today that measures to mitigate capital flows could be “useful.” Hours later, the rand dropped as South African Finance Minister Pravin Gordhan said his government will use part of higher-than-expected tax revenue to build foreign reserves as it attempts to weaken the currency.

The shifts suggest G-20 members will keep trying to defend their economies from the slide of the dollar and capital inflows even after the group promised Oct. 23 to refrain from “competitive devaluation” and to increasingly embrace market- determined currencies.

Bank Indonesia will “guard” the rupiah at its “fundamental” level of 8,900 to 9,300 against the dollar and buy foreign currencies to limit volatility, Governor Darmin Nasution said today. Bank Negara Malaysia Governor Zeti Akhtar Aziz told Bloomberg Television yesterday she favors a gradual strengthening of the ringgit.

More currency measures may be on the way. President Juan Manuel Santos has said Colombia may take additional steps this week to ease the pesoʼs rally and Chilean President Sebastian Pinera said Oct. 25 that his government plans to increase foreign investment limits for institutions.

Having already removed a 15 percent tax exemption for foreigners on income from domestic bonds, Thailand Finance Minister Korn Chatikavanij warned on Oct. 25 that regulators are “keeping an eye” on speculative inflows.

While he didnʼt advocate action by European governments, Luxembourg Prime Minister Jean-Claude Juncker, who chairs the group of euro-area finance ministers, also said today the dollar is “undervalued” against the euro.

“Europe is the victim” of global currency policies, Juncker said at a conference in Frankfurt.

Everyone a Victim

It would be easy to mock Juncker but truth be known, everyone is a victim of Bernanke's misguided Quantitative Easing strategy and interest rate policies.

It's an international currency war says Brazilʼs finance minister as noted in Pied Piper Politics; Krugman and Candle Makers Complain about the Sun; Global Trade Wars

For more on competitive currency debasement including capital controls, please see Emerging Market Economies Turn to Capital Controls; Forex Market in State of Disarray; Gold's Message; Life Imitates Art.

Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List

China Injury Case: Key to Global Balance? -WSJ-

2010-10-28T06:03:00.000-07:00

Concerned about rebalancing of the world economy? Then set aside the G-20 and all the complicated wrangling over exchange rates and ponder instead the story of a one-handed former Chinese factory worker.

: Associated Press; Chinese workers: When will they feel safe enough to spend?

Last year, Ruan Libing’s left hand was crushed in a molding machine while he worked the night shift at a factory making household appliances in Zhuhai, southern China. It had to be amputated. Without expensive surgery to create a prosthetic hand, the 21-year-old will likely never get factory work again and so faces a life with little or no income.

As compensation, Ruan initially received 90,000 yuan, or around $13,500 — the equivalent of 170 yuan a month for the rest of his working life, or about a tenth of the salary he was earning for a 60-hour work week. Yet his employer, Elec-Tech International Co. — a Shenzhen-listed manufacturer whose customers include Wal-Mart Stores Inc — was fully compliant with Chinese law, which prescribes different lump-sum compensation payouts based solely on injury type with no adjustment for the age of the victim or for the degree of employer negligence.

Magnified across an 800-million-strong labor force, this system feeds into the problem of global imbalances – or, put another way, the notion that Americans spend too much and Chinese too little. That’s because it encourages China’s workers to save in case they suffer an income-losing injury. Along with China’s woefully limited health insurance and retirement plans, the inadequate workers compensation model is a big factor behind its 30%-plus household savings rate.

Typically, injured Chinese workers accept their measly payout and leave. But Ruan’s case is different, and represents a change that could benefit the entire world.

For two months, Ruan kept his accident quiet to avoid upsetting his parents, who live in a cowshed in a village in Hunan Province and earn around 500 yuan a year. But eventually he broke down and told a cousin, who contacted an expatriate family she knew through her work as a travel agent in Shenzhen. They referred her to China Labor Bulletin, a Hong Kong-based advocacy group, which immediately adopted the case.

CLB found Ruan a lawyer, who filed a lawsuit against Elec-Tech in a Zhuhai District Court in July, alleging gross negligence on the company’s part. It was the first time a Chinese worker had brought such a suit against an employer – a test, as CLB described it, of “the inadequacies in China’s compensation system.”

The judge rejected the claim, but Ruan’s lawyer appealed to a higher court. Then the case got a big publicity boost: Wal-Mart sprung two surprise safety audits on Elec-Tech’s facilities to identify 55 incidents of worker injuries in the preceding 12 months, including other severed hands. The giant U.S. retailer found that numerous machines were inadequately equipped with safety guards and infra-red detectors and asked that half the stamping machines be turned off until they were repaired or replaced.

Elec-Tech moved to repair the machines and entered into negotiations with Ruan, who asked for a settlement of 260,000 yuan above the 90,000 already paid.

“Although we have fulfilled our responsibility according to the law, he was our employee and he was injured during work so we are considering giving him more compensation,” a spokesman for the company told China Real Time when asked about the case earlier this week.

On Wednesday, Ruan accepted a counteroffer from Elec-Tech for an additional 130,000 yuan on condition that he drops the lawsuit.

An extra $20,000 for 44 years of lost income might not seem like much, but what matters is that a deal was reached, with a payout significantly higher than the previous one.

The question is whether such advances will be accompanied by reform of the workers compensation system that provides real security for the future — security that might free working class Chinese to finally spend some of the money they’ve been stashing away.

–Michael Casey with contributions from Yuanni Chen.

G 20 focuses on current accounts -Korea herald2010. 10.22-

2010-10-25T23:18:00.000-07:00

GYEONGJU G20 finance ministers were struggling to find a common ground to prevent a currency battle from derailing a fragile recovery from the economic crisis as they launched a two-day meeting in Gyeongju on Friday.

Their first-day discussion focused on a U.S. and Korean proposal to set caps on current account balances as an option to resolve global imbalances and circumvent foreign exchange disputes.

The proposal which calls for setting numerical targets for current account surpluses and deficits, received mixed reactions initially. But Seoul officials said it could be seen as a feasible alternative to the competitive currency devaluations intensified over the past few weeks.

The two-day meeting of finance ministers and central bank governors is the last high-level talks before the Seoul summit on Nov. 11-12.

Major exports and developing nations are skeptical to the proposed trade balance cap.

Japan’s Finance Minister Yoshihiko Noda said that a U.S. proposal for setting a current account target is “unrealistic,” despite it being part of the G20’s job to urge countries to help avoid a race for cheaper currencies. “We need to talk about this first, but numerical targets seem unrealistic.”

A U.S. senior official Wednesday had said the G20 will discuss setting targets for current account deficits or surpluses at four percent of gross domestic product.

U.S. Treasury Secretary Timothy Geithner sent a letter to his G20 counterparts, urging the nations to “commit to undertake policies consistent with reducing external imbalances below a specified share of GDP over the next few years.”

Finance Minister Yoon Jeung-hyun (right) makes the opening speech at the finance ministers and central bank governors’ meeting in Gyeongju, North Jeolla Province on Friday. From left: U.S. Federal Reserve Board Chair Ben Shalom Bernanke, Bank of France Governor Christian Noyer, French Finance Minister Christine Lagarde, and Bank of Korea Governor Kim Choong-soo. (Yonhap News)

The letter was focused in pursuing the in-deficit nations to boost national savings and meet credible targets to reduce their debt levels. Recommendations given to in-surplus nations included fixing fiscal and structural policies to boost domestic demand.

It also urged G20 to “refrain from exchange rate policies designed to achieve competitive advantage.”

Korea, staying low-key on the issue so far, is speculated to mediate the tension through bilateral meetings. President Lee Myung-bak and Finance Minister Yoon Jeung-hyun said the exchange rate policy should be discussed at the G20 but more weight was given to the discussion over current account in tackling the economic imbalance.

The forum come at a moment when major global economies are pitted against each other to gain higher ground in the currency spat.

A central part of the dispute concerns mounting pressure on China and other Asian members, including Korea, to appreciate their currencies.

Early in the morning, finance ministers of the Group of Seven richest countries held a closed-door meeting.

The G7 consists of the U.S., Japan, the U.K., Germany, France, Italy and Canada.

Sources speculated that the unscheduled conference was aimed at coordinating foreign exchange strategies among the advanced countries amid the international currency war.

Apart from the G7 meeting, ministers of the U.S., France and Canada held a bilateral meeting with Korea’s Minister of Finance and Strategy Yoon Jeung-hyun, respectively, on Friday.

Noda told reporters in an emergency press conference that the G7 discussion would involve “the overall economy,” trying to emphasize that the meeting would not center on currency issues.

Japan notified Japanese reporters of the meeting Thursday night to talk about the sudden G7 meeting, sources said.

European Union Economic and Monetary Affairs Commissioner Olli Rehn on Friday morning said the G20 must avoid the downward spiral of competitive devaluations of their currencies. He also said, however, there is a possibility of nations failing to cooperate on economic policy.

Belgium finance minister Didier Reynders told reporters that G20 needs a balanced solution to exchange rates before the meeting began. He said exchange rates must be aligned with a nation’s economic strength.

A draft position paper from a G20 nation Thursday said G20 will pledge to “refrain from competitive undervaluation.”

It suggests G20 policy chiefs take a clear stance against a global currency war that seemed to be approaching after over a dozen nations stepped into foreign exchange markets to increase their trade surpluses.

The G20 will “move towards (a) more market-determined exchange-rate system,” it said.

Finance officials will discuss IMF reforms, global financial safety net, framework for strong, sustainable and balanced growth and bank reforms Saturday.

source - http://www.koreaherald.com/business/Detail.jsp?newsMLId=20101022000835

Asia stocks rise as G20 vows to avoid currency war - The Washington Post-

2010-10-25T02:18:00.000-07:00

The Associated Press
Monday, October 25, 2010; 4:39 AM

BANGKOK -- Asian stock markets rose Monday after a weekend meeting of global finance chiefs vowed to avoid a currency war that could derail the global economic recovery. European markets gained.
Shares in Australia got an added boost from news the Singapore Exchange is making a takeover offer for the Australian stock market operator, sending the ASX's stock price up more than 20 percent.
Oil prices, meanwhile, jumped to near $83 a barrel as the dollar weakened against the euro and fell to a fresh 15-year low against the yen, making the commodity cheaper for investors holding those currencies.
The two-day meeting of finance mandarins from the Group of 20 major advanced and emerging nations resolved to avoid weakening currencies to boost exports - a scenario that could cause a trade war. The group's statement, however, fell short of imposing any measurable targets
Nations in Asia and other regions have been trying to stem strength in their currencies amid sustained weakness in the U.S. dollar out of fear their exports will become less competitive. At the same time, China's currency, the yuan, has been effectively pegged to the greenback, provoking criticism it is being kept artificially low and giving the country's exporters an unfair advantage.
"The agreement the finance ministers reached is being interpreted by the market as a go-ahead to the U.S. to further devalue the dollar, that the developing countries won't partake in a competitive currency devaluation," said Victor Shum, an energy analyst with Pervin & Gertz in Singapore. "It's a signal to the market that some more weakening of the U.S. dollar will probably be tolerated by everybody else."
Asia relying less on exports for growth is seen as one of the adjustments that nations should make to ensure more stability in the global economy and markets in the aftermath of the global recession. Asian currencies rising against the U.S. dollar would help reduce so called "global imbalances" - a reference to the region's vast trade and current account surpluses and America's overreliance on debt-fueled consumption.
In early European trading, France's CAC-40 gained 0.6 percent to 3,891.07, Germany's DAX added 0.8 percent to 6,656.25 and Britain's FTSE 100 climbed 0.8 percent to 5,788.48.
Wall Street was set to gain with Dow futures ahead by 59 points, or 0.5 percent, to 11,149.00. Broader S&P futures rose 7.5, or 0.6 percent, to 1,188.20.
Japan's benchmark Nikkei 225 stock index bucked the gains in Asia, falling 25.55, or 0.3 percent, to 9,401.16 as the yen strengthened and the country's exports grew at their slowest pace this year in September, hit by cooling foreign demand and the yen's rise.
Australia's S&P/ASX 200 added 1.3 percent to 4,710.00 amid news the Singapore Exchange is making a $8.3 billion takeover offer for ASX, the operator of the Australian stock market.
The combined exchange company would be the world's fifth-largest by market value and rank as the second-largest stock market in Asia by number of listed companies, the two exchanges said in a joint statement. ASX shares surged more than 20 percent.
South Korea's Kospi added 1 percent to 1,915.71 and Hong Kong's Hang Seng climbed 0.9 percent to 23,732.05.
The Shanghai Composite Index vaulted 2.6 percent to 3,051.42 as investors recovered confidence following last week's interest rate hike. Elsewhere, markets in Singapore, Taiwan and India also rose.
In New York on Friday, the Dow Jones industrial average fell 14.01 points, or 0.1 percent, to 11,132.56.
In currencies, the euro rose to $1.4030 from $1.3952 in New York late Friday. The dollar fell to 80.52 yen from 81.50 yen.
Benchmark crude for December delivery rose $1.21 to $82.90 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.13 to settle at $81.69 on Friday.
----
Associated Press researcher Ji Chen in Shanghai and AP writers Alex Kennedy in Singapore and Shino Yuasa in Tokyo contributed to this story.

21일 남은 G-20 Summit Seoul을 기다리며....

2010-10-20T22:49:00.000-07:00

처음 G20 정상회담의 개최지로 Seoul이 결정되었을 때, 필자 역시도 그 놀라움을 감출 수 없었던 기억이 난다. 앞으로 21일후, 11월 11일부터 12일까지 양일간 전세계인들의 시선이 한국으로 집중된다. 이는 단순한 "서울에서 국제적 정상회의가 열린다."라는 의미가 아니라 한국의 위상이 국제적으로 얼마나 성숙되었는지를 확인하며 또 다른 도약을 준비하는 단계로의 변화를 부르는 신호탄이라는 의미를 가지고 있다.

현재 전 국민들은 G20 정상회의가 성공리에 개최되기를 간절히 바라고 있으며 회의에서 다루어질 안건에 대한 많은 관심을 가지고 있다. 이를 반증하듯 정상회의를 주제로한 모의회의들이 여러 대학, 언론사에서 개최되었거나 개최되고 있으며 많은 이들이 참여하고 있다. 모의회의를 통해 우리가 개최할 정상회의의 의미와 회의에서 다루어질 안건들의 중요성을 이해 할 수 있는 기회를 만들어주고 있으며 심지어 시장에서 만나는 사람들도 G20가 무엇인지는 몰라도 국제적인 행사라는 것에 대해서는 정도는 인지하고있을 정도로 국민들의 관심이 높다.

운 좋게도 필자는 이번 정상회의를 참관할 수 있는 자격을 얻어서 세계 정상들이 회의하는 모습을 직접 볼 수 있게 되었다. 그러나 국제회의 참관이라는 설레임과 함께 정상회의를 맞이하는 한 국민으로 몇 가지 염려스러운 것들이 있다.

그 첫번째로 국민들이 지속적으로 관심을 가질 수 있는 기반의 부재이다.

2002년 한국-일본 월드컵이 성공리에 개최되고 4위라는 엄청난 쾌거를 올렸을 때 국민들의 관심과 성원은 대단하였다. 매 게임이 있을 때마다 서울시청앞은 인산인해를 이루었고 전국의 모든 외식업소뿐만 아니라 해외에 있는 교포들이나 유학생들의시선은 TV앞으로 고정되었으며 한골, 한골 넣을 때마다 모두들 하나되어 기쁨을 나누었던 것은 당시에 한국인이면 모두들 기억할 것이다. 그러나 월드컵이 끝나고 한국리그의 관중석과 경기중개를 되돌아 보았을 때, 월드컴에 열광하던 국민들의 관심은 자취를 감추어버렸다.

G-20 정상회의를 월드컵에 비교하는 것은 조금은 억지스럽다고 하는 사람도 있을 것이다. 그러나 G-20 정상회의는 국제경제, 정치의 세계중심에 있는 회의이다. 이를 서울에서 개최한다는 것은 한국인으로서 굉장한 자부심을 느낄만한 일이다. 그러나 국민들의 정치에 대한 부정적인 시각, 현 정부에 대한 비관적 태도 등은 G20 정상회의를 단발적 행사라는 하나의 이벤트로 전락시킬 수 있는 위험요소를 가지고 있다.

현재 진행된 G20준비과정에서 대학생들이 참여하였던 모의회의는 어디에서도 "제 1회 모의회의"라는 수식어를 찾아볼 수 없다. 이는 수많은 모의회의가 단발성으로 끝나는 이색이벤트로서의 역할만을 하게될 수 있다는 것이다.

이번 정상회의는 지속적인 성과에 따라 현 체제를 유지하며 매년 열릴 예정이다. G20정상회의는 그 성과에 따라 그 체제가 변할 수 있다. 처음 시작할 당시 G7으로 시작하였다가 미국의 경제위기로 인해 국제사회에서 정상회의 필요성을 충족시킬 수 있는 G20체제로 변모하였다. 즉, 현재 G20체제는 G7체제보다 좋은 성과를 이루어낼 때만 지속성이 가능하다. 정부가 G-20체제안에 계속 남아있기 위해서는 정책을 시행함에 있어 국민의 지지가 필요하며 이를 위한 정부의 지속적인 지원도 병행될 때만 정상회의에서 좋은 결과를 만들어낼 수 있는 기반이 생기는 것이다.

정상회의의 성공적 개최도 중요하지만 한국의 국제적 지위를 유지하기위해서는 국민들이 지속적 관심과 지지를 이끌어 낼 수있는 방안들이 계속해서 모색되어야할 필요성이 있다.

두 번째는 국제화시대의 국민들의 인지도이다.

국제화라는 것은 여러나라들이 서로 경제적, 정치적, 그리고 문화적으로 서로 거미줄처럼 연결되어 세계각국에서 일어난 일들이 다른 나라들에 직, 간접적인 영향을 끼칠 수 있게된 하나의 연결고리와 같은 것이다.

정치적인 예를들면, 천안함 사건때 미국을 포함한 여러나라들이 한국을 지지한 반면 중국을 포함한 몇몇 나라들은 북한을 보호하는 입장에서 국제정세를 대변하였다. 천안함사태는 국내적 문제임에도 불구하고 국제사회에 영향을 미쳤으며 한미 연합 훈련시에도 중국과 외교적 마찰이 있었다.

경제적인 면에서는 미국에서 발생한 경제위기가 한국의 주식시장뿐아니라 주택, 은행금리등의 변화에 영향을 주었던 것은 단적인 예이다.

문화적으로는 한국의 대중 문화가 일본이나 중국, 인도, 베트남등으로 빠르게 퍼져나가고 ‘한류’를 형성함으로 한국의 유행문화가 다른 국가에서도 유행되는 현상들을 볼 수 있다.

이는 한국은 이미 국제화 속에 들어와있다는 것을 보여준다. 그렇다면 한국인의 문화의식은 국제화가 되었냐?라는 질문을 이쯤에서 던져보려한다. 이 질문은 정상회의가 열리는 기간동안 한국을 방문할 많은 외국인에 비칠 한국인의 모습이 향후 한국의 이미지가 될 수 있기 때문이다.

필자 역시도 평범한 한국인이다. 도심에 급하게 지나가는 행렬, 엘리베이터나 에스컬레이터를 탑승시 바짝붙어있는 모습, 보행자보다는 차량이 우선인 운전습관등은 필자에게 있어 여느 한국인처럼 익숙한 모습들이다.

그러다 가끔 TV에서 나오는 한 정유사의 광고, 국가브랜드위원회의 공익광고를 볼때면 내 자신의 부끄러운 모습을 느낄 때가 종종 있다. 광고를 보며 한 명의 한국인으로도 부끄럽다고 느끼는 행동들이 외국인의 눈에는 잘 보이지 않을까? 그들 눈에서는 당연하지 않은 모습이어서 놀라기도 할 것이다.

민망하면서 기억에 남는 일을 하나 예로 들어보면, 보스톤 유학시절 뉴욕으로 운전을 해서 갈 일이 있었다. 뉴욕하면 미국 내에서도 운전하기 쉽지 않은 도시로 유명하다. 몇명의 현지 친구들과 뉴욕시내를 차로 돌아다니는데 뜬금없이 한 친구가 입을열었다. “운전을 굉장히 잘하는 구나.” 그에 대한 대답은 “서울에서 운전해보면 알꺼야.”였다. 서울 도심에서 운전하는 것보다 수월한 뉴욕시내 운전에 대한 나의 생각이었다. 지금은 그 당시보다 훨씬 많은 사람들이 운전중 양보하는 모습을 볼 수 있지만 아직도 외국인의 눈에는 ‘무섭게 운전하는 한국인’이라는 인상을 주고있다는 것을 외국인 친구들과의 대화에서 종종 발견한다.

이렇게 글을 적는 것은 외국인에게 잘보이기 위해서 문화적 의식을 바꿔야한다는 것이 아니다. 그들에게 좋은 인상을 주기위해 영어를 배워야한다는 것 역시 아니다.

약간은 여유로운 모습을 가져볼 필요가 있다는 것이다. 운전중 양보, 에스컬레이터에 오를때는 한칸정도 거리를 두고 타고, 영어를 못 하더라도 웃어줄 수 있는 여유가 한국인에게 필요한 몇 가지 국제화된 문화의식 중 한가지 일 것이다.

G-20 정상회의의 성공적 개최를 준비도 중요하지만 이를 맞이하는 국민들의 정부에 대한 지지 그리고 국제화 속의 문화의식의 변화는 앞으로 한국이 나아갈 길에 좋은 토양의 역할을 할 것이며 이를 위한 정부의 지속적인 지원이 될 때 서울 정상회의의 개최가 성공적이라고 할 수 있을 것이다.

Africa: Commonwealth Countries Have Much to Offer to G20 Discussions, Says Leading Economist

2010-10-20T02:08:00.000-07:00

press release18 October 2010

"The Commonwealth has much to offer the G20," according to the economist Stephen Pickford, who wrote an article in a reference report presented to Commonwealth Finance Ministers at their meeting in Washington, DC on 7-8 October 2010.

"Its members include a broad range of countries at very different levels of development, in particular small and vulnerable states," he wrote. "And the Commonwealth has developed considerable expertise on the issues facing its members."

The economist noted that the Commonwealth's relationship with the G20 is not starting from scratch as its members countries make up one-quarter of the total membership of the G20 (a grouping Finance Ministers and Central Bank Governors).

According to Mr Pickford, while the G20 may be an effective mechanism, it should become more representative - especially for developing countries - if it is to play a greater role in the system of global governance.

Stronger and deeper

Mr Pickford, a former UK board member at the IMF and World Bank, acknowledged that the Commonwealth-G20 relationship could be stronger and deeper, and that increased co-operation would be beneficial for both groupings.

The G20, he noted, would benefit from the Commonwealth's analysis and also derive greater legitimacy and representativeness, while the Commonwealth can benefit by ensuring all its members' interests have a fair hearing in the discussions and decisions of the G20.

However, he cautioned that closer Commonwealth-G20 co-operation will need stronger processes and will require a commitment by the Commonwealth to deepen its analysis of issues under consideration by the G20.

Mr Pickford, the former International Monetary Fund and World Bank board member, highlighted trade, development and climate change as three priority issues on the G20 agenda where the Commonwealth can make a significant contribution.

Source:http://allafrica.com/stories/201010190848.html

Africa and the financial crisis, is it really going to be a war ?

2010-10-20T02:05:00.003-07:00

Mohamed Ghannouchi, Tunisia PM

The African Development Bank (ADB) took the initiative to gather the African ministers and bank governors to debate the world financial crisis which has been raging for some time, and about which the world experts say that the poorest among the African countries will be the most affected.

At a date between the seism and the G20 Summit, where Africa was represented by the Republic of South Africa alone, invited as an emerging country just like China and Brazil, the leaders coming from other African countries, decided to take action and discuss their own destiny.

The Tunisian Prime Minister, Mohammed Ghannouchi, was the only guest among African high officials who, in turn, took the floor to express their need for a positive approach for the continent, some of them even qualified this Summit as a war council, in which the best decisions should be made to minimise the impact on Africa.

Africa saw the tornado in the far !

The African decision-makers were nearly unanimous on the cat that this crisis will progress from Wall street to Main street, that is to say from the virtual finance to the tangible real economy.

The international banks operating in Africa are withdrawing partially or totally, fearing the collapse of their home market.

However, in exchange, even though the crisis will, undoubtedly, oblige us to adopt a more cautious attitude, some private national and international investors are now bringing to the market a record volume of new funds dedicated to Africa.

The financial institutions of the continent must find ridiculous the fact that Africa and most of the African countries have always been considered to be delayed and third world.

The initial evaluation of the African banks shows that the majority of these banks as well as the African financial institutions witnessed the crisis from very close. These banks, these financial institutions including the insurance companies are doing relatively well compared to their international counterparts.

However, if these banks and institutions benefited of their lack of integration into world economy, we are still concerned about the possible unforecast losses in the local markets of shares or due to the risk of change with the high devaluation of currencies in emerging markets.
If others were not able to avoid impact, Africa also will not also succeed to do so !

But we are sound and healthy on the financial plan, other sectors will certainly be affected. The global aspect of the crisis as well as the vulnerability of most African economies, do not leave room for imagining other scenarios, other than seeing the black continent affected, in turn by the financial tsunami.

First, the donations promised by the rich countries to Africa, according to Jean Ping, President of the Commission for the African Union «the financial crisis could reduce once again the ADP (which represents 70% of 2007 budget of the United Nations Fund for Childhood) with the possible consequences this would have on all the engagements made towards Africa».

Qualifying the African ministers Summit «a war council», J. Ping warned against a second wave of repercussions of the crisis as well as their impacts on the continent, which is translated in «a decrease in export receipts due to the decreasing world orders in terms of raw material, as well as a recession in the traditional partner markets of Africa which mainly affect tourism».

Later, the continent will also have to expect another wave of the crisis drawbacks. There will mainly be an avalanche effect because the fall in export receipts will be followed by a decrease in national revenues, a decrease in the investment capacity, a fall in national demand in public as well as private consumption, a rise in joblessness, an inability to cope with servicing the external debt, and many other aches to be added to a neglected Africa and only considered as a reserve of raw materials by the industrialized countries.

A hard job is awaiting the whole world !

Awaiting a final declaration to finish the activities of this Summit, many issues, solutions, suggestions may be drawn for the African continent in order to cope with the various repercussions of the crisis.

First, a climate of confidence must reign, not only in the choices and decisions made by the African political and economic decision-makers, but also and most importantly in the resources of this continent.

Before this crisis all the African countries have been able to maintain a growth rate of 6.5%, of course « the economic repercussions are henceforward dark, specifies Donald Kaberuka, President of the Group of the ADB, and that growth rate would decrease now to 5% », but Africa is emerging now after a period of ten years of sustained growth, mainly thanks to international demand in African export products, that is raw materials.

There are still so many raw materials in Africa, but also as underlined by the Tunisian prime minister, there is an important amount of human resources.

2008 did not only bring a financial crisis putting everyone in front of difficult choices, but it was also marked by a sharp food and energy crisis, Africa should learn from these crises not to let itself be dragged by overseas forces and expect the worse.

A huge work awaits the leaders of the different African countries in order to make more reforms, a work which consists in mainly adopting a strategy which puts the human being at the core.

A coordinated action should be undertaken to guarantee a good destiny to Africa, an action which should take into consideration the infrastructure improvement in the different African countries; these were the steps of a long and hard day.

A day with as a result a result a small hope for this Africa in war with itself and a victory is too much asking
! source: African Manager

China Plays The Game

2010-10-20T02:03:00.000-07:00

By: John M. Mason Tuesday, October 19, 2010 11:38 AM

The Chinese central bank has announced that it will raise the one year lending and deposit rates by 25 basis points. This has been a major surprise to international financial markets.

One can assume that this move was done very deliberately and very intentionally. The Chinese do not make policy decisions unless they are well thought-out.

The immediate reason for the move at this time: later this week there will be a meeting of the G-20 finance ministers. Next month in Seoul, South Korea there will be a meeting of the G-20 leaders.

The move is not an accident!

The International Monetary Fund just completed meetings earlier this month in Washington, D. C. Before that meeting, the United Statestook a strong stand on the value of the Chinese currency and the behavior of the Chinese government with respect to this value. The United States made an effort to get other nations to criticize the Chinese position.

The result of the IMF meeting? Little to no pressure was put on the Chinese giving indication that the United States was having no luck in its campaign to bring the Chinese "into line" on the value of their currency. The United States looked weak.

If China's action on interest rates is followed up by China allowing for a faster climb in its currency, the yuan, the Chinese will strengthen the position of their government within the G-20. It would also strengthen the role of other Asian nations as well as other BRIC nations in negotiations concerning the future of the dollar as a reserve currency.

Thus, the Chinese would build on the exhibited weakness of the United States at the meetings of the IMF in Washington and help to consolidate other nations around its leadership in world economic affairs.

Is the United States and China at war?

In one sense they are. Martin Wolf at the Financial Times of London has written, "In effect, the US is seeking to inflate China, and China to deflate the US. Both sides are convinced they are right…"

How has this situation developed? Well, in a real sense, the world has bifurcated. Part of the world, generally the developed countries, are struggling to restart their economies from the Great Recession, while many of the emerging countries are doing just fine, thank you.

The Federal Reserve System in the United States and the European Central Bank seem intent upon buying massive amounts of bonds to carry out a "Quantitative Easing" in an attempt to "jump-start" their economies. The prospect of this has resulted in a weakening of the dollar.
This has not been looked on favorably by the emerging nations who are experiencing economic growth and even a potential threat of inflation.

As a consequence, several of the emerging nations have already taken actions to protect the value of their currency from the weaknesses seen in the American position. These nations have already considered control techniques to protect themselves from the fall in the dollar exchange rate. They are considering the possibility having dual exchange rates, one for trade payments and one for non-trade payments.

The threat here is that world will break into two currency areas, one that is dollar/euro dominated and one that is dominated by China and the other emerging nations. And, certainly, the possibility of some kind of financial controls on foreign exchange is not a settling thought.

The reigning problem to me is the failure of leaders, especially leaders in the United Statesand in other developed countries, to appreciate the changes that have taken place in the world. The continued focus of the leadership in the United States on stimulating internal demand so as to achieve something, full employment of resources, that they really can't achieve, is leading them down the path of isolation. By continuing to follow an economic philosophy that has proven itself to be ineffective (if it ever was effective) is only creating a fissure within the world.

In effect, the United States, by pursuing the same type of policy it has followed for the last 50 years, is not only weakening itself but is providing the stage for the Chinese to exert its own leadership to those the United States policy is hurting.

The Chinese are moving to achieve a position of prominence in the world of the 21st century. What they are doing is very intentional and when they do things, they do them in their own time and for their own reasons. They are not always right, but that is not the point.

The point is that the Chinese are very deliberate in promoting themselves and their country. The United States, however, seems to be helping them achieve what they want to achieve. This cannot continue.

Source :http://www.istockanalyst.com/article/viewarticle/articleid/4593820

U.S. and Korean lawmakers call for big changes to trade agreement Posted By Josh Rogin

2010-10-20T01:58:00.000-07:00

Tuesday, October 19, 2010

When world leaders convene on Seoul next month for the G-20 Summit, trade policy experts are hoping that the United States and the South Korean government will be able to show that they've made progress in finalizing the terms of the long-suffering South Korea-U.S Free Trade Agreement.

The Office of the U.S. Trade Representative (USTR) argues that the agreement, which was signed in 2007 but has not been approved by the United States, "would be the United States' most commercially significant free trade agreement in more than 16 years" and would add $10 billion to $12 billion to annual U.S. GDP, and around $10 billion to annual merchandise exports to Korea. But the deal faces opposition from Congress, and especially from Democrats on Capitol Hill, who complain that it fails to address issues of Korean automotive surpluses and restrictions on Korean imports of American beef.

The U.S. Chamber of Commerce has been pushing hard for the Obama administration to iron out the differences in advance of the G-20 meeting in November, which the president pledged to do when he met with South Korean President Lee Myung-bak in June. But as the U.S. midterm elections approach, both Democratic and Republican candidates have staked out their opposition to the deal amid fears that it could send precious American jobs overseas.

On Monday, 21 U.S. lawmakers joined with 35 South Korea lawmakers to write to both presidents demanding significant changes in the agreement. "An FTA that prioritizes corporate interests over those of our constituents is not an agreement but a compromise of our countries' ideals, and it is one we foresee working to defeat," the lawmakers wrote.

Congressman Mike Michaud (D-ME), chairman of the House Trade Working Group, said in a statement publicizing the letter, "Even beyond the market access issues for textiles, autos and beef, the current free trade agreement is based on the same failed NAFTA model and promises to ship U.S. jobs overseas."

The letter also calls on the agreement to better address issues of alleviating poverty, advocating social justice, advancing human rights, and protecting the environment.

On October 9, USTR put out a statement that the U.S. and the ROK had ""exchanged views relative to the US-Korea trade agreement," but neither side had offered a "formal" proposal. For some Korea observers, the United States' reticence to announce progress in the ongoing discussions over the agreement sends a signal that the administration may not be able to show any concrete progress at the November Seoul Summit.

"Anodyne blather like this helps explain rising concern, if not cynicism, in some business and media circles that USTR is under such tight political constraints from the White House that even having a 'framework' ready for Obama and Lee to initial at the G-20 seems a long shot," Samuels International Vice President Chris Nelson wrote in his newsletter The Nelson Report.

"Certainly the Obama political pros are terrified of angering Labor activists who must turn out in large numbers if Nov. 2 is not to be a total disaster," continued Nelson, "and who can blame them?"

Source:http://thecable.foreignpolicy.com/posts/2010/10/19/us_and_korean_lawmakers_call_for_big_changes_to_trade_agreement

EU's Rehn says G20 must rebalance world growth

2010-10-20T01:56:00.000-07:00

Tue, Oct 19 2010

* Global imbalances emerge, U.S. running out of steam - Rehn

* Says G20 must coordinate policy to rebalance world economy

By Daniel Flynn

LUXEMBOURG, Oct 19 (Reuters) - The European Union's monetary affairs chief called on G20 governments on Tuesday to take coordinated steps to rebalance world economic growth, ahead of their talks this week in South Korea.

EU Economic and Monetary Affairs Commissioner Olli Rehn said imbalances that destabilised the world economy before the 2008- 2009 financial crisis were emerging again, with exporting nations running excessive trade surpluses while others racked up unsustainable deficits.

Rehn said economic recovery in the United States, where jobless rates have remained stubbornly high and consumers cautious about spending, "appears to be running out of steam". While unemployment had fallen in most of Europe, a rebound in the region's economy was still "in progress", he said.

"In the world economy...the pre-crisis imbalances are emerging, which threaten sustained recovery and job-creation," Rehn told a news conference after talks between European finance ministers in Luxembourg.

"It's essential that the G20...will be able to restore a sense of unity and especially pursue effective international policy coordination to rebalance global growth," he said.

The Commissioner will travel to South Korea this week for Oct. 22-23 talks between G20 finance ministers expected to focus on reform of the IMF, new rules for international banking regulation and global currencies.

In recent weeks, the EU has closed ranks with Washington in accusing China -- set to become the world's second largest economy this year -- of keeping the yuan CNY=low to boost exports, undermining jobs and growth in Western economies.

ALL COUNTRIES MUST DO MORE

With the euro topping $1.40 in recent days, its highest level since January, European officials have increasingly expressed concern that the currency could act as a counterweight in a tug-of-war between the yuan and the dollar.

However, China's central bank jolted markets on Tuesday with a surprise first rise in interest rates in nearly three years, upping benchmark rates by 25 basis points, reflecting its concern about rising asset prices and inflation. [ID:nSGE69I0HU]

Analysts said the move might suggest a deal between Washington and Beijing on easing exchange tensions after Treasury Secretary Timothy Geithner vowed the United States would not devalue the dollar for its own advantage. [ID:nTOE69I048]

Washington has also delayed a decision on whether to label China a currency manipulator until after a summit of G20 leaders in November in Seoul.

Rehn, who has repeatedly called for China to revalue the yuan more quickly, struck a measured tone on Tuesday.

"All countries should do their part to rebalance global growth. The surplus countries by reinforcing domestic demand and the deficit countries by prioritising...export growth," he said.

The United States would like to see the G20 serve as a more open forum for discussion of global currencies -- an aim shared by France, which takes over the presidency of the group after the November heads of state and government meeting.

French Economy Minister Christine Lagarde said G20 issues were not discussed in depth on Tuesday.

European ministers, however, expressed satisfaction they clinched a hard-fought deal on hedge fund regulation ahead of the G20 talks this week, allowing them to present a united stance. [ID:nLDE69I1QN]

(Additional reporting by Annika Breidthardt and Jan Strupczewski, editing by Rex Merrifield)

Source:http://www.reuters.com/article/idUSLDE69I1SR20101019?pageNumber=1

Argentina says rich nations should focus on jobs

2010-10-20T01:51:00.000-07:00

Tuesday, October 19, 2010 1:51 PM EDT

Argentina's economy minister called on developed nations on Monday to create more jobs rather than take measures that are weakening their currencies and hurting emerging powers.

Speaking ahead of this week's meeting of finance leaders from the G20 major developed and emerging nations, Amado Boudou said a "true currency war" was being waged, referring to policies rich nations have pursued that weaken their currencies and spur exports.

This has sent speculative cash flooding into higher-yielding developing markets, where currencies are firming at an uncomfortably quick pace.

"Developed countries should have expansive measures oriented toward their domestic markets that allow them to create jobs. This hasn't worked very well up to now but they have to insist on this," Boudou told Reuters.

Asked if he was suggesting that the world's top economies increase spending, he said: "We don't like people giving us advice, so we don't give advice either. But clearly the measures they've taken up to now have been insufficient."

The U.S. government came up with a roughly $800 billion stimulus package to help steer the U.S. economy out of recession in 2009.

It has since shied away from further big spending plans amid concerns among voters about the budget deficit. The U.S. Federal Reserve is now mulling new monetary stimulus measures which have weakened the dollar and fueled demand for emerging economy assets and currencies.

Currency tensions are sure to figure high on the agenda of the G20 gathering in South Korea, but Boudou said officials should focus on moving forward with previous commitments such as overhauling international financial regulations, diluting the power of credit rating agencies and eliminating tax havens.

"These three issues put together are related to international (capital) flows. So we think we should continue with this agenda," Boudou said. (Editing by James Dalgleish)

Source: http://www.ibtimes.com/articles/73573/20101019/federal-reserve-south-korea-argentina-g20-argentina-says-rich-nations-should-focus-on-jobs.htm

Currency turmoil could jeopardise recovery: WTO chief

2010-10-20T01:49:00.001-07:00

By blade

Created 19/10/2010 - 20:04

WTO chief Pascal Lamy warned just days before a key meeting of G20 finance ministers that economic recovery could be put in "serious jeopardy" by "uncooperative" behaviour on foreign exchange markets.
"The hard-won path towards stability and trade-led recovery could be put in serious jeopardy by uncooperative currency behaviour," Lamy told a meeting of the World Trade Organisation's 153 members on Tuesday.
The WTO director-general said the response to fears that economies might seek a competitive advantage by inducing a favourable exchange rate was a matter for the International Monetary Fund (IMF) rather than the WTO.
"But I nevertheless thought that I would share this concern with you because I believe history will judge us harshly if our collective efforts towards exiting the economic crisis were to be frustrated by short-sighted individual rent seeking," Lamy said.
Group of 20 finance ministers and central bankers are expected to discuss volatile foreign exchange markets at a meeting in South Korea on Friday, ahead of a G20 summit next month.
Some analysts fear a protectionist "currency war" in which major economies seeking to export their way out of the downturn try to cap or lower their currencies to keep the prices of their exports down.
Hours before the informal meeting of the WTO's rule-making Trade Negotiations Committee, Lamy told journalists that "there is a risk of friction and it is real."
"Exchange (rates) are moving more for the moment than they had a few months ago," he added. "There is a certain amount of disorder."
Lamy said a multilateral approach was the best way of containing the risk, beginning with a common diagnosis of the origins of the instability in foreign exchange markets.
He pointed out that if a country used exchange rates to boost its competitiveness, it placed political pressure on others.
"There's a risk of reaction and counter-reaction, which is typically what we have managed to avoid," he explained.
The United States and Europe claim that China, the world's biggest exporter, is keeping its currency grossly undervalued, while the US dollar has fallen and Brazil has intervened to halt the real from appreciating.
The World Bank said in a report on Tuesday that a stronger yuan exchange rate was in China's interests and would help the country rein in inflation and boost domestic consumption.
It said that "developed and developing countries worldwide are bent on avoiding stronger exchange rates, as concerns about weak foreign demand -- and a limited scope for exports to boost growth -- intensify."
The report on East Asia's developing economies -- which excludes Japan, South Korea, Singapore, Hong Kong and Taiwan -- said China remains the region's economic powerhouse, with projected growth of 9.5 percent in 2010.

Source URL: http://www.france24.com/en/20101019-currency-turmoil-could-jeopardise-recovery-wto-chief

EU states reach agreement on hedge fund rules

2010-10-20T01:47:00.001-07:00

European Union member states reached an agreement on Tuesday to impose new regulations on hedge funds and other alternative investment firms.
The rules, which still require the backing of the European Parliament to become law, are part of EU efforts to tighten financial regulations to prevent another economic crisis.
Differences over the controls had been undermining attempts by Germany, France and Britain to speak with one voice as they prepare for a summit of Group of 20 countries.
"I think it was important to approve unanimously the rules on financial supervision ... as we have done before going to the G20 meeting, and I hope the parliament will approve this before the G20 meeting of heads of state and government," Belgium's Didier Reynders said after chairing a meeting of EU finance ministers in Luxembourg.
Member states had been divided over whether to grant a licence to foreign funds that want to work across the European Union's 27 countries.
German Deputy Finance Minister Joerg Asmussen said an EU-wide funds passport would be in place for EU-based funds from 2013. For foreign-based funds, it would be available from 2015.
In its initial reaction, the Alternative Investment Management Association welcomed the agreement.
"We are glad that European finance ministers have reached agreement," said Andrew Baker, the trade body's CEO.
"There is still much in the Directive that will be difficult to implement for the industry, and there will be a heavy compliance burden that the industry will have to bear. But the impact will be far less severe than if something close to the original proposal had been agreed."

Basel boss says tougher rules will 'help banks avoid crises'

2010-10-20T01:45:00.000-07:00

STRICTER capital and liquidity requirements for banks will help bolster the global financial system against possible future crises and ultimately save taxpayer money, an international banking official said overnight.

Since the outbreak of the global crisis in 2008, the Group of 20 leading advanced and emerging nations has been working to coordinate polices to revive economic growth and shore up the world financial system through stronger capital and liquidity regulations.

The Basel, Switzerland-based Financial Stability Board (FSB) and the Basel Committee on Banking Supervision have been working on a package of proposed reforms expected to be presented to G-20 leaders for consideration at a summit in Seoul next month.

The FSB and the Basel Committee are holding separate meetings this week in the South Korean capital ahead of a gathering of G-20 finance ministers and central bank governors later this week and the Seoul summit on Nov 11-12.

"Higher levels of capital combined with the global liquidity framework will substantially reduce the probability and severity of banking crises in the future," Nout Wellink, head of the Basel Committee, said overnight after its meeting attended by dozens of central bank and banking supervisory officials from 27 countries.

"And this helps to safeguard financial stability and economic growth and to reduce the exposure to the public sector and taxpayers," he added. Mr Wellink is also chief of the central bank of the Netherlands.

Last month, the oversight body of the Basel Committee agreed for banks to significantly increase their capital reserves by the end of this decade, seen as a way to bolster bank finances and control excessive risk-taking - two problems identified as major factors behind the global financial meltdown.

Proposed ideas since the advent of the crisis include not only stricter capital requirements but also enhanced supervision of large institutions which, if they failed, could potentially destabilise the entire financial system as happened in 2008 with the collapse of US investment bank Lehman Brothers Holdings.

The G-20 has taken over from the Group of Seven advanced nations as a key priorities-setting forum and steering committee for the global economy since the financial crisis.

It includes both advanced economies such as the US, Germany, Japan and France as well as emerging ones like China, Turkey, Brazil and India.

South Korea is the chair country for this year's meetings.

From correspondents in Seoul

From:AP

October 20, 2010 8:08AM

Currency war looms over G-20

2010-10-20T01:42:00.000-07:00

Oct 20, 2010

SEOUL - G-20 finance ministers will meet in South Korea this week to try to chart a new direction for the world's economy after a devastating downturn, but fears of a 'currency war' could blow them off course.
The host nation dislikes the phrase - Finance Minister Yoon Jeung Hyun has said the exchange rate issue is not 'like a duel in a Western film'. But South Korea admits the disputes will loom large over the October 22-23 meeting of ministers and central bank chiefs in the south-eastern city of Gyeongju.
Ministers will set the agenda for the November 11-12 Group of 20 summit in Seoul, South Korea's biggest international event for two decades. Seoul wants to leave its mark on history with a 'Korea Initiative' to set up a global financial safety net aimed at protecting emerging markets from disruptions caused by sudden changes in capital flows.
The nation, which built its economic 'Miracle on the Han River' on the ashes of the Korean War, also intends to put development prominently on the G-20 summit agenda for the first time.
And it wants to push ahead with reforms to the International Monetary Fund (IMF) to give emerging countries greater voting power, while encouraging the adoption of post-crisis rules to bolster the world's banks.
'South Korea... will stress that a currency war is tantamount to mutual economic destruction and push for a compromise,' an organiser told Yonhap news agency on condition of anonymity. The United States and European Union, trying to export their way to economic health amid lacklustre domestic demand, accuse China of significantly undervaluing the yuan to boost its own exports. China says it is being made a scapegoat for US domestic problems. -- AFP

출처 - http://www.straitstimes.com/print/BreakingNews/Money/Story/STIStory_593027.html

China surprises with first rate rise since 2007-REUTERS-

2010-10-20T01:40:00.001-07:00

1:44am EDT

By Aileen Wang and Tom Miles

BEIJING (Reuters) - China's central bank surprised on Tuesday with its first increase of interest rates in nearly three years, a move that reflects concern about resurgent asset prices and could mark the start of a more aggressive phase of monetary tightening in the world's fastest-growing major economy.

The People's Bank of China said it was raising benchmark rates by 25 basis points, taking one-year deposit rates to 2.5 percent and one-year lending rates to 5.56 percent.

If there was ever any doubt about China's role in driving the stuttering global economic recovery, the impact was felt by markets across the board. Oil and gold prices tumbled, stocks turned negative in Europe and the dollar jumped.

"The interest rate rise is entirely outside of market expectations," said Zhu Jiangfang, chief economist at CITIC Securities in Beijing.

"The recent rise in headline inflation has put the real rate into negative territory. And I think that's why the central bank needs to raise interest rates in such a hasty way," he said.

Some analysts said the rate increase also suggested a deal was in place between China and the United States to strengthen the yuan and put an end to worries about a currency war of competitive devaluations ahead of upcoming Group of 20 meetings.

But others said just the opposite was the case -- with higher rates, Beijing can afford to rely less on currency appreciation to keep the economy on an even keel.

Finance ministers of the G20 major economies will aim to tackle the currency strains in a meeting in South Korea starting on Friday. The country also hosts a G20 leaders' summit in November.

Although announced by the People's Bank of China, the decision to increase rates would have received approval from the highest echelons of Chinese power, with Premier Wen Jiabao likely signing off on it.

Once a consensus has been forged in Beijing to raise or cut rates, past experience shows that moves often come in bunches.

In the view of some, it is about time for China to embark on a more aggressive tightening cycle. To date, it has relied on lending restrictions and banks' reserve requirements to keep growth from boiling over.

"Fundamentally, policy rates are just too low for an economy that's growing around 10 percent. To avoid bigger distortions, China needs to start moving rates to more appropriate levels," said Rob Subbaraman, an economist with Nomura in Hong Kong.

"China's economy looks as though it's decoupling from other major economies, and its policies should as well," he said.

DEBATED BUT UNEXPECTED

A number of leading economists, including some advisers to the central bank, have urged an increase in deposit rates to keep savers' returns in positive territory.

China reported consumer inflation of 3.5 percent in the year to August and economists expect that the pace climbed to 3.6 percent in September.

Still, the increase in rates is surprising given that several top leaders have recently expressed confidence that inflation is under control, and have said that higher rates would potentially suck in speculative capital from abroad.

"They did it now likely because Thursday's GDP and CPI data is too strong for them," said Dariusz Kowalczyk, senior economist at Credit Agricole CIB in Hong Kong.

China is due to report third-quarter GDP and a suite of economic data for September on Thursday. The consensus forecast is that economic growth slowed to 9.5 percent year-on-year last quarter, down from 10.3 percent in the second quarter.

Economists polled by Reuters last month had expected an extended period of interest rate stability in China, with no increase until the second quarter of 2011.

COLD WATER ON MARKET?

Propelled in part by these expectations of low rates, Chinese asset prices have shown signs of taking off.

The Shanghai stock index, a laggard for much of this year, has jumped nearly 16 percent in the past nine trading days. And despite a months-long campaign to clamp down on the real estate market, housing inflation has started to perk up again.

"This is a bucket of cold water for the market," said Zhang Yuheng, an analyst with Capital Securities in Shanghai. "The hike itself is not a big one, but the psychological impact is big as the expectations for more rate hikes will appear."

Higher rates make yuan-denominated assets more attractive and could in theory place upward pressure on the Chinese currency. Until a fall on Monday, the closely managed currency had risen 2.5 percent against the dollar since the end of August, its quickest pace of appreciation since a 2005 revaluation.

"It certainly leads to speculation that the U.S. and China are in some sort of a deal which will perhaps see the U.S. taking a more gradualist approach to QE (quantitative easing)," said Simon Derrick, head of forex research at Bank of New York Mellon.

The speculation was also fueled by recent events. U.S. Treasury Secretary Timothy Geithner said he had delayed a report due last Friday into whether Beijing manipulates the yuan's value to win time to drum up support within the G20 for "improvements" in the currency policies of China and other emerging economies.

On Monday, he said the United States would not devalue the dollar to gain an export advantage.

Beijing, and other emerging markets, complain that loose money in the United States is generating an influx of speculative capital and weakening the dollar, while Washington and others say a deliberately undervalued yuan gives China an unfair trade advantage.

But Ting Lu, an economist with Bank of America-Merrill Lynch in Hong Kong, said the exchange rate's rise would be capped.

"The People's Bank of China will firmly control the pace of yuan appreciation once pressure from U.S. politicians is alleviated," he said.

(Additional reporting by Reuters bureaux around the world; Writing by Simon Rabinovitch: Editing by Neil Fullick)

Ministers resolve row on hedge fund regulation

2010-10-20T01:39:00.001-07:00

Published: 20 October 2010

European Union countries agreed on Tuesday to impose new regulations on private equity and hedge funds, paving the way for a wide range of controls in the opaque sector.

Background

In April 2009, the European Commission proposed a new set of rules for hedge funds and private equity firms, requiring mandatory registration and disclosure of their activities to regulators, while at the same time easing their access to European markets in the long term (EurActiv 30/04/09).
The main regulatory component of the proposed legislation is an obligation for EU-based managers of so-called 'alternative investment funds' to register and disclose their activities, in order to improve supervision and avoid systemic risks.
The obligations are not applied to the funds themselves, but only to their managers, who are considered responsible for key decisions. However, critics said that exempting funds from the proposed new regulation would leave hedge funds and private equity free to develop their investment policies, despite the fact that their risk-prone attitudes were strongly criticised during the financial crisis.

Agreement came as France and Britain ended a running battle over EU measures to rein in hedge funds, which some fear pose a threat to the financial system.
The rules are meant to add transparency, chiefly by putting the sector under the eye of a pan-European watchdog that France hopes will gather more powers and grow its 100-strong staff over time.
"Before, there wasn't any regulation, any supervision," said Michel Barnier, the European official in charge of financial reform, flagging 72 powers of intervention to be given to a new EU supervisory agency.
"There is going to be supervision now [...] European supervision. Lots is going to change."
Joerg Asmussen, Germany's deputy finance minister, applauded the deal, saying it meant Europe could hold its head high at a meeting later this week between finance ministers of the Group of 20 of the world's top economies.
"We wanted to have this guideline ready so we could travel to the G20 summit and say 'yes, we have rules in Europe for hedge fund managers and private equity managers'."
Many compromises
France backed down on its previous demands to give the new markets watchdog the responsibility for issuing EU licences for foreign funds to work across the bloc's 27 countries. In return, Britain agreed to delay the start of this new licensing scheme for foreign-based funds until around 2015.
"It is indeed a compromise," said French Economy Minister Christine Lagarde. "We could probably have come up with something better."
"We have had innumerable compromises," said Didier Reynders, the Belgian finance minister who helped broker a deal. "We have now got a final text fully supported by all."
The law will extend the range of information private equity and hedge funds must hand over, such as what products and on which markets they are trading.
It also subjects them to summary bans on short-selling, a power slated for the new EU markets agency.
The EU law, which is set to be waved through by the European Parliament next month, represents the end of a campaign by French President Nicolas Sarkozy to clamp down on a group of investors derided as "locusts" by a German politician.
But as popular interest waned in France and as Paris became increasingly isolated among Europe's big powers on the issue, his position looked increasingly hopeless.
Germany's Asmussen, whose growing frustration with France forced Lagarde to compromise, flagged a new system of guardians to monitor what is happening to investor money at a hedge fund as well as safeguarding the investments it has made.
This is intended to prevent sham investment schemes like that run by Bernard Madoff, who paid dividends to investors using their own money.
"They have the duty to disclose to investors and regulators," said Asmussen. "They also have to inform investors what their investment strategy is [...] and which leverage they plan to use."
The industry gave the new law a guarded welcome.
"There is still much in the directive that will be difficult to implement and there will be a heavy compliance burden that the industry will have to bear," said Andrew Baker, head of hedge-fund industry group AIMA.
"But the impact will be far less severe than if something close to the original proposal had been agreed."
(EurActiv with Reuters.)

Positions

Commenting on the political agreement reached at yesterday's meeting of finance ministers on the Alternative Investment Fund Managers Directive, the UK's Financial Secretary to the Treasury, Mark Hoban, said:
"The UK is committed to robust, proportionate and transparent regulation of hedge funds and private equity managers as agreed at the G20 summit in London. Investors will now be able to choose from a global range of funds meeting the highest regulatory standards."
"Today's agreement represents a significant advance from the situation in May, when member states were on the verge of voting through an agreement that would have closed the EU market to funds from third countries, undermining competition and closing off a source of investment to the EU economy. We believe this represents a good outcome for investors and the businesses they finance," Hoban continued.
"Today member states passed a fundamental stage towards an agreement on this important directive, an agreement which would not have been possible without the commitment and determination of the Belgian Presidency," said the EU commissioner for the Internal Market, Michel Barnier, welcoming the agreement.
"The text takes into account the numerous and legitimate requests of the European Parliament with whom we must now finalise this agreement. I wish to thank Jean-Paul Gauzès for the key role he played in these negotiations," Barnier continued.
"We are glad that European finance ministers have reached agreement on AIFMD. There is still much in the Directive that will be difficult to implement for the industry and there will be a heavy compliance burden that the industry will have to bear. But the impact will be far less severe than if something close to the original proposal had been agreed," read a statement from the Alternative Investment Managers Association (AIMA) in London.
"The European Parliament rapporteur for the AIFM Directive, Jean-Paul Gauzès (EPP, FR) welcomes the progress made between member states today, notably on the system to be applied to managers from non-EU countries and looks forward to convening another negotiation meeting next week," according to a statement from theEuropean Parliament yesterday.

Next Steps

Nov 2010: European Parliament to vote on AIFMD

Global Economic Crisis: Towards a Worldwide Process of Geopolitical Dislocation-By GEAB-

2010-10-18T17:26:00.000-07:00

Global Research, October 17, 2010
GEAB N°48 - 2010-10-16
In this issue, our team introduces the annual "country risk" update in the light of the crisis. Based on an analysis incorporating eleven criteria this year, this decision-making tool has already demonstrated its relevance in faithfully anticipating developments over these past twelve months. The identification, at the beginning of 2009, of a new phase of the crisis (the phase of global geopolitical dislocation) forced us to take new parameters into account (nine indicators were selected in 2009) to effectively incorporate trends that are reshaping the global system (1). As 2010 draws to a close, LEAP/E2020 now estimates that the world’s various countries are heading for a collective dive at the core of this phase of socio-economic and strategic geopolitical dislocation (2). Thus our studies enabled us to continue presenting the LEAP/E2020 anticipation of "country risk" for the 2010-2014 period (3), by adapting the categories to the crisis’ development, via four groups of countries (4) characterized by the contrasting impacts of this dive in the geopolitical dislocation phase of the global systemic crisis (5). On the other hand, in this GEAB issue, we give our anticipations for the progress of Euro-Russian relations between now and 2014. In our recommendations, we pay particular attention to helping our readers deal with a currency market in global conflict, a fallout anticipated over 18 months ago by our team, as a result of geopolitical dislocation. Moreover, on the occasion of the publication of his book "The Global Crisis: The Path to the World After - France, Europe and the World in the 2010-2020 decade ", Franck Biancheri, Director of LEAP/E2020, and Anticipolis editions, have given us permission to publish his analysis of the process of the ongoing global geopolitical dislocation. Documented instances of social unrest 2009-2010 - Source: IILS, 09/2010 The G20’s (or IMF’s) now patent failure to secure effective international cooperation to try and remedy the structural weaknesses of the current international monetary system perfectly illustrates LEAP/E2020’s anticipation which in March 2009, before the London G20 meeting, explained that the summit was the only window of opportunity to fundamentally rethink the global monetary system at the heart of the current crisis. In failing to seize this opportunity, we reported that the world would begin to enter the global geopolitical dislocation phase from late 2009. At that time, by way of an introduction to this new phase of the crisis, the world has seen the mid-flight explosion, during the Copenhagen summit, of the whole international process on global warming. Since then, every month brings a stream of public finance crises in one state or another, drastic austerity measures causing increase in social unrest (6), international meetings leading to reports of disagreement, the proliferation of threats between States over trade imbalances, etc., all against a background of a downward spiral into hell of the global system’s central power, namely the United States (7). Change in labour force participation between the first quarters of 2009 and 2010 (Indonesia, Mexico, Brazil, Germany, France, South Korea, Argentina, Italy, Canada, United Kingdom, Japan and the United States) - Source: IILS, 09/2010 For several months now we have been witnessing the onset of a massive currency world war just like LEAP/E2020 anticipated nearly two years ago and reiterated in its time-frame of the crisis (8). Several weeks hence, the inevitable failure (9) of the FMI/G20 duo to resolve these currency-trade (10) tensions will provide both new evidence while marking a new tipping point of global geopolitical dislocation: every man for himself becoming the rule (11). Two weeks from now, with the announcement of the actual details of a comprehensive plan to reduce spending, the United Kingdom will eventually have to face an unprecedented (12) socio-economic crisis that it has desperately tried to hide for months (13), and it will have to do it alone (since the United States are unable to help it, and it has put itself outside the European financial rescue system). And in three weeks, the United States will concurrently expose an unprecedented political paralysis following the mid-term election (14), whilst the US Federal Reserve will launch a new attempt to rescue the US economy by monetizing a stimulus plan that the federal government is no longer able to launch (15). This attempt - whose size will be less than financial markets expect (because the Fed is now forced, in this case by the holders of US Dollar denominated assets: China, Japan, Europe, oil-producing countries (16)...) but more than enough to lead to a further fall in the dollar and plunge the world monetary system into an even worse conflict - will fail anyway because US society has, de facto, entered a phase of austerity that US leaders, in 2011, will have to recognize must also constrain the country’s fiscal and monetary policy (17). From the world leaders’ side (18), the next four years’ global sequence can be summarized quite simply: last US attempts to "return to the world before the crisis" (stimulating consumption, maintaining deficits, debt monetization) that will all fail (19), last Western attempts to deal with the crisis using "Washington consensus" methods (limiting deficits by reducing social spending, no tax increases on high incomes, privatization of public services, ...) which will generate growing socio-political chaos, acceleration of the BRIC countries’ exit from the majority of Western financial and monetary markets (especially the two financial pillars of Wall Street and London) which will increase monetary instability, rising intensity of trade wars (coextensive with currency wars (20)), the coming to power from 2012 of groups of leaders who have decided to try new solutions (21) to exit the social, economic and political consequences of the crisis, taking note of the fact that the “Washington consensus” is dead ... because there is no consensus anymore and because Washington is a moribund world power. As for the rest, the keeping the US debt’s Triple-A rating belongs to the same virtual world as the recent declaration by US economic authorities (22) of the end of recession: the growing disconnect between the words of a collapsing system’s key players and the reality perceived by the majority of citizens and socio-economic players is an infallible indication of systemic decline (23). But the financial markets are not mistaken because with the soaring cost of insuring US debt hot on the heels of Ireland and Portugal with a 28% third quarter increase in cost, the United States has become the third country for which the debt markets fear some very unpleasant surprises (24). Comparative progression of the United States’ deficit (in trillions USD) and the amount of known global reserves held in U.S. Dollars (1999-2009) - Sources: Reuters/IMF/White House OMB, 10/2010 Notes: (1) From the beginning of 2006, in the GEAB No. 5, LEAP/E2020 indicated that the global systemic crisis would evolve in 4 major phases. "A global systemic crisis develops in a complex process that can be cut into four phases which may overlap: . a first "trigger" phase that suddenly sees a whole series of factors, hitherto disconnected, start to converge and interact, and which mainly remain noticeable to alert watchers and the main players . a second phase called "acceleration" which is characterized by the sudden realization by the vast majority of players and observers that the crisis is here because it starts affecting a rapidly growing number of the system’s elements . a third "impact" phase which is formed by the radical transformation of the system itself (implosion and/or explosion) under the effect of accumulated factors and which simultaneously affects the entire system . and finally, a fourth phase called "decanting" that sees the release of the new system’s characteristics resulting from the crisis. Source GEAB No. 5, 15/05/2006 . early 2009, in the GEAB No. 32, LEAP/E2020 identified a fifth phase of the crisis, called global geopolitical dislocation, which begins at the end of 2009, following the G20 failure to launch a credible process of establishing a new international system, particularly in the monetary field. This new phase has been, of course, integrated into the time-frame presented last year in GEAB No. 38. (2) The ability of states to cope with social unrest that will multiply in the coming quarters and years is closely linked to their ability to contain the most traumatic social effects of the crisis; therefore, our team has introduced a tenth indicator correlated to the tax burden of the past twenty years, whilst an eleventh indicator has been added to assess the resilience to a global monetary war. (3) Our team has analyzed indicators for 39 countries in addition to Euroland. (4) These country- risk analyses may be particularly useful for those planning an investment in a given country, intending to settle there or wishing to make an investment in assets linked to that country. (5) We chose to keep 2014 as an overview because we believe that the changes in political leadership occurring in many important countries (China, USA, Russia, France, ...) in 2012, and which are the principal potential positive factor looking at the next four years, will have no appreciable impact on these country-risks before 2014, the time that new policies are starting to yield results. (6) France gives a striking example with the growing unpopularity of an executive which fails to prevent social unrest against its reforms and which risks turning into a general strike (France 24, 14/10/2010). Meanwhile, throughout Europe, there is a marked increase of extremist political forces. Source: Le Point, 20/09/2010 (7) All the lights are turning red. The road transport volume has started to decline again (Los Angeles Times, 13/10/2010). Foreclosures continued to grow last month, whilst the whole legal system on which they rest has now broken down (for the legal reasons mentioned in the GEAB a year ago) upsetting a real estate market on Fed and Federal Government life support even more (CNBC, 14/10/2010; USAToday, 14/10/2010; USAToday, 11/10/2010). Cities are sinking into vey deep deficits (such as their employee retirement funds estimated at over 500 billion USD,CNBC/FT, 12/10/2010) and are obliged to turn to the states to try and extricate themselves (CNBC/NYT, 05/10/2010), while the latter can no longer balance their budgets and are obliged to pay interest rates higher than developing countries (thus, Illinois must now pay more than Mexico to borrow, Bloomberg, 05/10/2010). (8) See the GEAB N°43 particularly. (9) History doesn’t repeat itself. If we pushed so hard (including at the cost of a full page advertisement in the global edition of the Financial Times) for world leaders to seize the opportunity at the G20 in Spring 2009, it was because we were aware that such a set-up would not happen again. Now the US is too weak to continue to steer the global game, no other player is able to take affairs in hand ... and therefore, the global financial system looks more and more like the "drunken boat; in Rimbaud's poem describing the drift towards unexplored beaches, a perfect description of the world’s course today. (10) As for the negotiations on climate change, a "West" already clearly divided (here between the Dollar, Pound, Yen and Euro), tries to make the emerging countries (the Yuan in particular) pay the cost of adapting a system they invented and which no longer works. And it's not by ending the game as shown by US efforts to prevent any new Chinese rating agency from operating in the United States that will dissipate this feeling in the BRIC countries. One remembers the performance in Copenhagen. It will pale in comparison to what awaits us at the G20 meeting in Seoul. Besides, the soaring gold price is a very reliable indicator: even the European central banks have stopped their sales. Sources: New York Times, 21/09/2010; Vigile, 29/09/2010;PrisonPlanet/FT, 27/09/2010, Bloomberg, 10/10/2010; ChinaDaily, 27/09/2010 (11) The Telegraph summarized it admirably on 11/10/2010 in "Jobless America threatens to sweep us all away." Sign of the times, Bloomberg on 08/09/2010 announces the opening of a Ruble-Yuan currency exchange in Shanghai to finance Sino-Russian trade. (12) There is a growing fear in the United Kingdom over the country’s social and political situation in the context of "super-austerity" planned by the government due to financial and budget crisis: the loss of nearly a million jobs, social crisis, unrest.... Sources: Independent, 02/10/2010;Telegraph, 13/10/2010; Guardian, 11/09/2010; MarketWatch, 21/09/2010. (13) This was, moreover, the main reason for the “Greek crisis becoming the Euro crisis” in Spring 2010, in particular fed daily by articles in the Financial Times to divert attention from London and the Pound Sterling. See GEAB in the first half of 2010. (14) Recent statements by Steve Schwarzman, head of the financial giant Blackstone, comparing Barack Obama's willingness to tax financial companies more heavily to Hitler’s invasion of Poland, illustrates the explosive atmosphere that rules at the core of the US elite. Source: NewYorkPost, 14/10/2010 (15) Because of the magnitude of existing deficits and political deadlock in Washington. (16) In this regard, our team gives a timely reminder that there is no mystery about the simultaneous rise of different asset classes, like stocks or gold for example: operators are leaving the stock exchanges (as we showed in the last GEAB issue) and selling their financial and monetary assets for gold (or other less dangerous assets) and the Fed (and its partners) are injecting liquidity into the financial markets to prevent a widespread collapse. The only problem, when the music stops: it will be a tragedy for the stock exchanges. Source: CNBC, 08/10/2010 (17) The situation is so bad that a reading of the New York Times of 13/10/2010 started to look like a cut and paste of the GEAB a year or two ago ... that’s saying something! The article by Michael Powell and Motoko Rich, which describes the "recovery" as merely a continuation of this recession shows the plight of the middle classes across the country in a harsh light, while the very same day Paul Reyes unveils a remarkable collection of photographs showing the ravages of the "Very Great US Depression" as LEAP/E2020 has called it since late 2006. (18) Franck Biancheri offers a detailed presentation, with the two likely main scenarios for 2010-2020, in his book "The Global Crisis: The Path to the World after; (19) Source: SeekingAlpha, 24/09/2010 (20) Singapore’s recent announcement that from now on its currency’s trading band against the U.S. dollar will be wider, is the latest example (each day brings a new one) of increasingly defensive positions taken by individual states. Each one tries to increase its room for maneuver to cope with the unexpected. Incidentally, it is interesting to note that Singapore suffered a 19% third quarter fall in GDP, evidence that the mood in Asia is becoming gloomy. Source:YahooFinances, 14/10/2010; MarketWatch, 13/10/2010 (21) For China, one solution will most probably be to inject the country's huge US Dollar reserves into the economy as already suggested by the new generation of Chinese bankers. This will not help the US Dollar. Source: Dallasnews, 19/09/2010 (22) The National Bureau of Economic Research (NBER is in charge of "holding a Mass" on this subject. (23) As MSNBC aptly described on 06/10/2010, it’s once a month at midnight that America’s great depression is revealed in the supermarkets, when tens of millions of food voucher recipients go and do their shopping. According to the study by the Center for Economic and Policy Researchpublished on 16/09/2010, in effect now one in three Americans can no longer make ends meet (one hundred million people ). (24) Source: CNNMoney, 12/10/2010

To Balance Global Economy, Recalibrate Democracy

2010-10-18T17:17:00.000-07:00

As the G-20 gears up to meet next month in Seoul, it is not surprising that the United States and China are at loggerheads.

The "clash of systems" between America, the borrower and consumer, and China, the saver and manufacturing exporter, has generated an imbalance in the global economy that, if not corrected, threatens the peace and prosperity that has so far been achieved through globalization. That correction cannot occur overnight and cannot be economic alone. It depends ultimately on the recalibration of democracy in both the West and East.

In China's case, further democratization would include free labor unions and expanded rights for the rapidly growing urban middle class. Less censorship and more robust forms of political accountability would aid the reorientation of its juggernaut from export-led growth toward domestic consumption. Such changes would inevitably make the well-being of the household competitive, as a political priority, with the factory.

China might learn from the policies of Asia's development pioneers -- Japan, South Korea or Taiwan -- where income became more evenly spread as wages rose to capture productivity increases, and a credible safety net was put in place with high and broad levels of investment in education to enable the next generation to move up the value-added ladder. All these neighbors of China managed a middle-income transition by establishing the reliable rule of law that made government accountable, through freer expression and some sense of social security. In a developing market, confident expectations about how society will work widely stimulate greater consumption.

In the U.S., political reform necessarily involves a shift away form the short-term political horizons and cultural habits of consumer democracy. Unless we can find ways to integrate the long-term perspective in governance and insulate it from immediate political pressures, it will be difficult to adopt policies that lead us back to fiscal prudence, revived productive employment, replenished savings and a middle class built on rising income instead of debt. Absent such a shift, there is certain to be a backlash against globalization -- aimed with populist anger at China.

Corrective policies, in other words, must seek to undo the way American and Chinese inequalities have played off of each other -- a low-wage, export-led economy piling up huge reserves from overconsumption by an American middle class that fills the gap in its falling status through borrowing at rates pushed low by flush liquidity from China and an accommodating U.S. Federal Reserve.

Former IMF chief economist Raghuram Rajan has argued that political pressures to compensate for America's growing inequality gap over the past 30 years through eased credit by the Federal Reserve, abetted by huge Chinese purchases of U.S. Treasury debt, were a driving dynamic behind the housing bubble.

Since 1975, Rajan points out, the wages of the 90th percentile of the U.S. population (the top 10 percent) grew 65 percent more than the 10th percentile. In 1975, the top 10 percent earned about three times the bottom 90 percent. By 2005 it had risen to five times.

In an economy where consumption accounts for 70 percent of GDP, the gap between the American Dream and the American Reality was bridged by debt. In short, easy credit, not savings, enabled the demoted middle class to "keep up with the Joneses." By 2007, consumer debt in the U.S. equaled 100 percent of GDP. Rajan sensibly worries that reigniting growth by encouraging renewed purchases of houses and cars through further easy-credit policies, even if it successfully avoids deflation, will only lead us back to an unsustainable bubble.

In the U.S., the proper tax and education policies (because, in an era of technological change, education is the key variable of income differentials) as well as policies that foster infrastructure investment and domestic production would diminish the rapidly rising inequality Rajan documents. Fairer wage spreads in a developed consumer economy would enable the middle class to once again thrive on earnings and savings instead of seek to maintain their diminishing status through credit.

Change won't be easy. Vested interests in China favor export production industries and the associated political stability of continued rapid job growth that goes along with a strategy that has worked for decades. Vested interests and cultural inertia in the U.S. favor a return to the high consumption which has driven growth during that same period.

China, at least, has the political capacity as an authoritarian mandarinate to change course from the top if the Communist Party is confident enough to heed the feedback signals of a burgeoning middle class that is demanding a more open society. Premier Wen Jiabao has said "the people's wishes and needs for democracy and freedom are irresistible," that "freedom of speech is indispensable for any country," and that "without the safeguard of political reform, the fruits of economic reform would be lost."

It seems an equally daunting challenge to convince an open society used to living off of leverage to mend its ways. But if reality is the mother of fundamental reform in China, it can be no less so in the United States.

Reasons for the clash of currencies

2010-10-18T03:40:00.000-07:00

The principal topic of hot debate in the previous week end's IMF-World Bank meetings was the need for realignment of currencies to reduce the global imbalances (read US deficit and unemployment).

No agreement could be reached, with China standing firm on its policy of the last few months, of a more flexible exchange rate for the yuan, which, in practice, means a deliberately gradual appreciation of the currency to give time to domestic industry to adjust (the yuan has appreciated around 2.5 per cent against the dollar since June 19, but the day-to-day movements have been in both directions). The problem has now been escalated to the G20 summit in Seoul next month.

The fact is that, for some time now, countries have been taking actions to stem the rise of their currencies against the currencies of their major trading partners. For example, Switzerland [ Images ] and Japan [ Images ], both developed economies, have intervened in the exchange market in recent times.

But the world's largest exporter, China, is at the heart of the dispute. If these are wars, they seem to be "defensive" wars - to protect the domestic real economies, which produce 95 per cent of the output and employment, from the exchange rate gyrations to which speculative capital flows can lead. Japan, clearly, has experienced these, and in spades, in the 1990s.

The dollar-yen rate gyrated from ¥147 at the beginning of the decade to around ¥80 in 1995, to ¥146 in 1998 and ¥112 in just two months thereafter! There was no significant difference in inflation rates, or current account balances of the two economies. (To be sure, Japan did undergo a banking crisis.)

The real reason is the so-called "feedback loops" that exaggerate price trends, sometimes grossly - in either direction. Basic economic theory suggests that the rise in the price of an asset should reduce the demand for it, and a fall makes it more attractive.

In practice, in financial markets, too often, higher prices of assets attract more buyers, leading to a further rise in the price - until, of course, the music stops one day.

The problem is that the cost of rate gyrations has to be borne by the real economy in terms of slow growth, recession, unemployment, and so on.

The 1990s and the last 10 years have been "lost decades" for the Japanese economy because of the gyrations in its asset prices and the exchange rate - a fact that China, always conscious of the need for social stability, and with a social security net far weaker than Japan's in the 1990s, is surely aware of.

There are two different strands of the issue of managing exchange rates, one philosophical and the other, more immediate, political. As for the first, the major Anglo-Saxon economies, namely the US and Britain, have been market fundamentalists for the last 30 years or so.

The philosophical or academic underpinning is provided by the Chicago School and economists like Friedrich von Hayek. It believes in the efficiency of the markets and that market prices reflect all economic fundamentals.

A corollary is that any regulatory intervention to influence the market prices can only distort them and, therefore, give a less than optimum result.

The bankruptcy of the concept of markets being always virtuous, and regulation being always sinful, was highlighted in the recent credit crisis, particularly in the two largest Anglo-Saxon economies, leading to a global recession.

Critics of managed exchange rates describe them as "manipulated" exchange rates: by that logic, I suppose every country in world was "manipulating" exchange rates from 1945 to 1970 (the fixed exchange rate era), and, in any case, is guilty of "manipulating" the domestic value of the currency (inflation) through monetary policy!

Despite all the monetary and fiscal stimuli after the crisis, unemployment in the US remains stubbornly high at near-double-digit levels, and the ruling Democrats face the prospect of a major setback in the mid-term elections.

In such a situation, it is always politically simpler to blame the foreigner: the Chinese exchange rate policy.

With China refusing to be hurried, the US Congress has passed a legislation authorising the president to impose a duty of 20 per cent on Chinese imports. It has been claimed that this would help create a million jobs. This proposition has several unstated assumptions:

The duty will not merely replace Chinese imports by imports from other countries, but be replaced by increased output and employment.
In as much as most of the cheap Chinese imports are purchased by the relatively poor, it is acceptable to force them to pay the higher prices of domestic goods.
The rise in domestic cost level (inflation) is needed to create jobs. (Have we not always been told how great lower inflation is?)
An import duty of 20 per cent means a devaluation of the dollar by that amount against the yuan. The dispute is likely to become hotter ahead of the G20 summit next month as the US' August trade data released last Thursday showed a widening of the deficit, mainly because of higher imports from China.

source: http://business.rediff.com/column/2010/oct/18/guest-reasons-for-the-clash-of-currencies.htm

A V Rajwade

Source:

G-20 Seoul Summit 2010

for EU summit (SERI)

Goal and accomplishments at past G-20 Summits - JungAng daily- 11.12.2010

g20 summit-regular gathering

Briefing by Minister of Culture, Sports and Tourism Yu In-chon

미디어센터

G-20 Currency Agreement to Agree Collapses Already

China Injury Case: Key to Global Balance? -WSJ-

G 20 focuses on current accounts -Korea herald2010. 10.22-

Asia stocks rise as G20 vows to avoid currency war - The Washington Post-

21일 남은 G-20 Summit Seoul을 기다리며....

Africa: Commonwealth Countries Have Much to Offer to G20 Discussions, Says Leading Economist

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China Plays The Game

U.S. and Korean lawmakers call for big changes to trade agreement Posted By Josh Rogin

EU's Rehn says G20 must rebalance world growth

Argentina says rich nations should focus on jobs

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By blade

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Basel boss says tougher rules will 'help banks avoid crises'

Currency war looms over G-20

China surprises with first rate rise since 2007-REUTERS-

Ministers resolve row on hedge fund regulation

Background

Positions

Next Steps

Links

Global Economic Crisis: Towards a Worldwide Process of Geopolitical Dislocation-By GEAB-

To Balance Global Economy, Recalibrate Democracy

As the G-20 gears up to meet next month in Seoul, it is not surprising that the United States and China are at loggerheads.

Reasons for the clash of currencies

The principal topic of hot debate in the previous week end's IMF-World Bank meetings was the need for realignment of currencies to reduce the global imbalances (read US deficit and unemployment).