Oct. 23, 2010, 12:12 p.m. EDT
G-20: Recovery under way but ‘uneven’
By William Spain, MarketWatch
CHICAGO (MarketWatch) — Meeting in South Korea, the Group of 20 finance ministers and central bankers noted Saturday that a global economic recovery is under way but uneven, and warned of the need to move toward more “market-determined” currency exchange rates.
A recovery “continues to advance, albeit in a fragile and uneven way,” the group said in a joint communiqué. “Growth has been strong in many emerging-market economies, but the pace of activity remains modest in many advanced economies.”
U.S. encounters turbulence at G-20
U.S. efforts to prod China to let its currency appreciate ran into flak in the Group of 20 as other countries worried the U.S. approach, if applied globally, could impair their growth.
Plenty of risks remain, they added, and those risks differ by country and region, “yet given the high interdependence among our countries in the global economic and financial system, uncoordinated responses will lead to worse outcomes for everyone.”
Cooperation is essential, the group said, in urging a “move towards more market-determined exchange rate systems that reflect underlying economic fundamentals and refrain from competitive devaluation of currencies.”
More advanced nations need to be “vigilant against excess volatility and disorderly movements in exchange rates” in order to “help mitigate the risk of excessive volatility in capital flows facing some emerging countries.”
For his part, U.S. Treasury Secretary Timothy Geithner, attending the summit, said that the world’s economy “is going through a necessary, but complicated process of adjustment” following “large financial imbalances” that include excess borrowing, overinvestment in real estate and “unsustainable leverage in the financial sector.”
All of these factors contributed to the current crisis and will likely slow the pace of recovery, he said, although “emerging-market economies are expanding at a rapid pace, and are attracting substantial flows of capital.”
What is needed is “a shift in growth strategies by countries that have traditionally run large trade and current-account surpluses, away from export dependence and toward stronger domestic demand-led growth,” Geithner said. “This entails a range of policy changes, as you can see in the very broad range of domestic reforms being undertaken by China. An important part of this transition is a gradual appreciation of these emerging-market currencies relative to the major currencies as a group.”