G-20 Soft Call to China

Group of 20, which summit ended today in Cape Town, South Africa, has released its statement. To some surprise it didn’t contain any strong implications to China’s monetary policy, as some expected. Although E.U., Canada and U.S. officials were motivated to bring China to the faster decisions, which could lead to the yuan appreciation, it seems that they failed.
The released statement included a notion to all emerging Asian economies to develop a “greater exchange-rate flexibility”, without mentioning Chinese yuan as the main target. Nevertheless, China understands what G-20 statement meant,and which “Asian emerging economy” has a trade balance surplus, which is causing an opposite deficit in European Union, U.S. and Canada.
Unlike G7, G20 is not that much influenced by U.S. or E.U. This probably allowed for a softer statement. But as it was mentioned before, besides making statements E.U. is ready for some actions. And China will certainly need to listen to what its global partners say about weak yuan policy. Facing a protectionism policy in one of its biggest markets is the least thing the largest world’s exporter needs. Adding further inflation rise problems, People’s Bank of China may soon expand the yuan’s floating band, which will eventually lead to its appreciations against major currencies.

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