Finger-pointing at the G-20 will be self-defeating for an international forum that should be focused on coordination, not criticism, of economic policies, a senior Chinese government official said.
Underlining the extent to which China wants to shield its currency policy from censure, a second official said that the Group of 20 summit in Canada on June 26-27 was not the right place for discussing "the yuan issue."
The comments appeared to be an attempt to draw a line in the sand about what should be discussed at the summit of wealthy and emerging economies, cast as a warning that controversy could hinder the global recovery by rattling market confidence.
Financial markets are watching the G-20, which Chinese President Hu Jintao will attend, for any statements about China's policy of pegging the yuan to the dollar after the United States stepped up its criticism in recent days.
"If we allow the G-20 to turn into a process of finger-pointing, then it will certainly send out a very confusing and misleading signal to the markets and to the general public," said a senior official, who spoke to reporters on the condition of anonymity.
"This will certainly lead to very serious consequences in the global economy. I do not think that would be the purpose of the G-20 process, and that would be self-defeating for the group," he said.
Qin Gang, a foreign ministry spokesman, was more explicit.
"At the G-20, in my view, it is inappropriate to discuss the yuan issue," he told a regular news briefing.
"The yuan exchange rate issue was not a cause of the international financial crisis, and it is not a hurdle for world economic recovery, rebalancing or sustainable growth."
Complaints about the yuan have eased over the last two months as the euro zone debt crisis has taken center stage. But U.S. Treasury Secretary Timothy Geithner said last week that the yuan was an impediment to global rebalancing, suggesting that U.S. patience with China's currency policy was wearing thin.
Many lawmakers in the U.S. Congress contend the yuan is grossly undervalued, unfairly squeezing out competition against cheaper Chinese goods.
A senior Canadian official said this week that the G-20 must be careful not to exert too much direct pressure on China, while still delivering the message that a stronger yuan would be in Beijing's own interest.
With China's trade surplus having surged in May, attention is shifting back to how much its growth model — marked by weak consumption and strong exports — is to blame for global imbalances that were a root cause of the 2008 financial crisis.
Chinese leaders have long insisted — and many economists agree — that a set of policies broader than just its exchange rate regime is needed to overhaul the economy.
The senior Chinese official said change would not happen overnight.
"We are also trying to pursue economic restructuring and to transform our pattern for economic development. That is exactly what we are doing, but it will take some time," he said.
It was unreasonable to expect the Chinese people to immediately fill the void left by U.S. consumers who are spending less money in the wake of the global financial crisis, he said.
"Construction workers in Beijing or Shanghai, if their income increases, may be ready and happy to buy more home appliances and new bicycles, but you cannot expect them to buy a new Mercedes overnight," he said.
"Chinese workers might lose their jobs in the textile industry, in the toy industry, in the shoe industry because of lack of demand from overseas markets, but you cannot turn them into investment bankers overnight," he added.
On the question of coordinating the withdrawal of anti-crisis stimulus programs, the Chinese official said it would be a delicate balance at the G-20 summit to demonstrate that governments would still remain supportive of markets.
"We have to be careful not to give people the impression that the entire group is starting the so-called exit strategy at the same time," he said.
"We have to make sure that while some of the members are trying very hard to reduce their budget deficits to improve their macroeconomic and financial and budgetary balances, we are still firmly committed toward economic recovery."
He also said that China would look to the G-20 summit in Toronto to push forward prior agreements to increase the representation of developing countries at the International Monetary Fund.
A review of the IMF's power structure will likely increase the votes of big emerging economies, especially China, before a January 2011 deadline.
© 2017 Thomson/Reuters. All rights reserved.