Singapore: Asia-Pacific governments were expected on Thursday to back stimulus plans next year and call for market-oriented exchange rates to ensure a fragile economic recovery under way can be sustained.
Finance ministers from the Asia Pacific Economic Cooperation forum began meeting on Thursday to discuss how to strengthen the post-crisis global economy to prevent asset bubbles and excess leverage with prudent macroeconomic and regulatory policies.
The latest draft communique to be issued following their meeting on Thursday calls for “market-oriented” exchange rates and interest rates.
“We will undertake monetary policies consistent with price stability in the context of market-oriented exchange rates that reflect underlying economic fundamentals,” the draft dated 11 November says.
The 21-member Pacific Rim group includes China, which is under pressure, particularly from the United States, to allow its currency to rise, having effectively pegged it against the dollar since the middle of 2008 to help fend off the global downturn.
China’s representative was at the meeting drafting the communique, a delegation spokesman said.
The ministers’ declaration also backs stimulus measures governments have put in place around the Pacific rim, including an estimated $1 trillion in Asia alone and $787 billion in the United States.
Australian Treasurer Wayne Swan told reporters on Thursday before going into the Apec meeting: “What we have to do is to make sure that we don’t withdraw global support too early.
“In Australia’s case, our economic stimulus peaked in the middle of this year and is being gradually withdrawn as we go through the rest of the year,” Swan said, adding the government was closely watching employment figures as a gauge.
Data released on Thursday showed Australian employment rose for a second straight month, pushing the Aussie dollar to a 15-month high and fueling bets the Reserve Bank of Australia would raise interest rates in December.
World Trade Organisation Director Pascal Lamy cautioned, however, of a false dawn in the recovery.
“There’s certainly a recovery happening, certainly in this region, which has suffered less from the crisis than from other regions of the planet,” he told CNBC in an interview on the Apec sidelines in Singapore. “But I would be prudent whether or not this would be sustainable six months or a year from now.”
China signals flexibility
China’s central bank, the People’s Bank of China provided the country’s clearest signal yet that it would allow the currency to appreciate again. It said it will consider major currencies in guiding the yuan.
Beijing’s control of the yuan is a hot-button topic. The US administration says the yuan is undervalued and is one factor contributing to economic imbalances between the first- and third-biggest economies in the world.
President Barack Obama told Reuters in an interview he would raise the yuan issue with Chinese leaders when he visits there next week.
Apec foreign, trade and finance ministers have gathered in Singapore ahead of a summit of their leaders this weekend focused on avoiding future crises, whether financial or climatic.
Apec is dominated by members of the Group of 20, including the United States, Russia, Japan and China, which has supplanted the Group of Seven as the premier forum for global policy making.
While China has been under pressure over the yuan, Washington for its part has been under pressure over the weakening dollar, which fell to a 15-month low on Wednesday.
US Treasury Secretary Timothy Geithner said on Wednesday in Tokyo he believed in the need to maintain a strong dollar and said America was determined to get its budget deficit down.
The US Treasury chief was visiting Japan before joining the meeting of Apec finance ministers in Singapore.
Policy-makers in emerging market nations are also concerned that their currencies could be boosted against the US dollar by inflows of money to levels that would undermine exports.
Taiwan, an Apec member, imposed some capital controls on Tuesday to deter bets on currency appreciation, coming after Brazil last month imposed a tax on foreign investment in stocks to contain a stronger real.
Asia Development Bank President Haruhiko Kuroda said on Wednesday free-floating currencies may not be appropriate for emerging markets and in some cases they might need to manage capital inflows with controls.
Apec member economies account for 40% of the world’s population across four continents, more than half of global gross domestic product and nearly half of world trade.
But their members range from relatively poor countries such as Papua New Guinea, Peru and the Philippines, emerging markets such as Indonesia, Thailand and Malaysia, and rich economies, including the United States and Japan.