China says resorting to a blame game could derail G20 summit

Beijing :  Finger-pointing at the G20 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 to discuss "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 G20, 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 G20 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 G20 process, and that would be self-defeating for the group," he said.

Qin Gang, a foreign ministry spokesman, was more explicit.

"At the G20, 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."

Patience wearing thin

Complaints about the yuan have eased over the last two months as the euro zone debt crisis has taken centre stage.

But US Treasury Secretary Timothy Geithner said last week that the yuan was an impediment to global rebalancing, suggesting that US patience with China's currency policy was wearing thin.

Many lawmakers in the US Congress contend the yuan is grossly undervalued, unfairly squeezing out competition against cheaper Chinese goods.

A senior Canadian official said this week that the G20 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.