Developed economies still recovering from the financial crisis are looking for ways to regain momentum as the global economy shifts in favour of China and other emerging markets.
That task will be high on the agenda when finance ministers of the Group of 20 leading economies meet here this week, three months after President Obama and other G-20 leaders sparred at a tension-filled gathering in Seoul over how to resolve the trade, currency and monetary imbalances that are widening a divide in the world economy.
Signs of trouble that had worried officials before the global financial crisis — volatile capital flows, exchange rate pressures and rapidly growing foreign-exchange reserves — have been gathering new momentum in emerging markets. Dominique Strauss-Kahn, managing director of the IMF, warned in a recent speech that these issues could cause the next crisis if left unresolved.
Officials meeting in Paris on Friday and Saturday will debate which aspects of a country’s economic performance should be used to help their peers identify potential problems, Christine Lagarde, the French finance minister, said at a briefing Monday. “China saves and exports. Europe consumes. The US. borrows and consumes. Is this a balanced model? Probably not.”
While decisions about which measurements to use may be technical, they are also politically tricky. China, in particular, has resisted suggestions by the advanced economies of the G20 to include measures for exchange rates, which have become a particular sore point recently now that trade deficits and surpluses have started to rise in many countries, after falling during the financial crisis.
“It’s about identifying structural weaknesses,” Christian Noyer, governor, France’s central bank, said of the efforts under way to measure imbalances.
G-20 officials will also discuss ways to correct other imbalances, including the sharp surge in food prices, and a surge in commodity prices. NYT