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G20 finance, bank chiefs to tackle challenges facing global economy
10/10/2005
BEIJING, Oct 9 (AFP): Challenges threatening global economic growth, including soaring oil prices, asset bubbles and trade imbalances will top the agenda when finance and bank chiefs from 20 of the most important countries meet in Beijing later this week, analysts said.
The gathering of finance ministers and central bank governors from the Group of 20 major developing and rich nations comes after world oil prices hovered at around 65 dollars a barrel, threatening to slow growth in developed and developing countries.
While the October 15-16 meeting will mainly focus on development issues and reform of the International Monetary Fund and World Bank, the top issue will likely be energy, US Treasury Undersecretary Tim Adams said last week.
"You have both producers and consumers sitting around the same table," said the deputy to US Treasury Secretary John Snow, who was to arrive in Tokyo Sunday to launch a 10-day tour that will also take him to China.
Economists increasingly worried about asset bubbles in many of the major economies said the G20 will no doubt have to address the unhealthy trend.
"In terms of bubbles, this is probably the biggest bubble ever. It's everywhere. There's property bubbles in the UK, US, Australia, Europe, some parts of Asia," said Raymond Foo, Asia regional strategist for BNP Paribas Peregrine.
"The world monetary policy is just way too easy and that has created way too much money. Money has to find a place to go and it has to go into asset classes so by default they then create bubbles. Prices become way too expensive."
The United States, the biggest and most influential economy in the world, will face the most pressure to correct the imbalances, Foo and others said.
While much focus has been placed on China's currency, which Western countries said is undervalued by as much as 40 per cent, China is much less important in the global environment, Foo said.
But China is becoming increasingly important in terms of global imbalances.
China, which has the fastest growing major economy in the world, is the current chair of the G20.
Analysts said they do not expect Western nations at the forum to put much focus on pressing for more appreciation of Asian currencies, especially China's. China cannot move too fast, they said.
"We support the government's current approach. In the longer term, the exchange rate should be flexible, but they should do it step by step," said Tang Min, chief economist of the Asian Development Bank's mission in China.
Chen Xindong, chief economist for BNP Peregrine Securities, agreed.
"China as a host will control the agenda. It won't be put in an embarrassing position," said Chen.
Snow said on the eve of his trip he would ask China for more currency flexibility, but analysts said Snow was more likely to do that in bilateral meetings after the G20 gathering.
The United States and other developed countries welcomed as a positive first step China's move in July to end its decade-long currency peg to the dollar in favor of a managed float against a basket of currencies and to revalue the yuan by 2.1 percent. But they indicated more revaluations are needed.
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