ASEAN KEY DESTINATIONS
G-20 in Nanjing discusses yuan
By David Swartzentruber
Although commentators say the world is now in the “G-Zero” phase, a power vacuum where no world coalition holds sway, the G-20 has started its meeting on Chinese soil in Nanjing.
The meeting started with a call by US Treasury Secretary Timothy Geithner for more consistency in exchange rates to facilitate easier flow of capital. The target of this is China , who many say won’t allow their currency to appreciate quickly enough.
Its doubtful that any progress will be made with China on that score but China’s push for the yuan to become a reserve currency in the International Monetary Fund's Special Drawing Right (SDR) basket. That proposal was backed by French President Sarkozy as well as Geithner but Geithner stated that any currency in the basket would have to loosen control of their currency and that implies flexible exchange rates.
At least for now, expect no changes in the status of the yuan. But as pressure builds, a tit for tat looms. China gets its reserve currency in exchange for the adoption of a flexible exchange rate policy. This would benefit commerce globally as well as in Asean.
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