♠ Posted by Emmanuel in
China,
Economic Diplomacy,
Latin America
at 4/21/2010 12:02:00 AM
A few days ago, Brazil, Russia, India, and China conducted a summit in Brazil's capital, Brasilia. What is interesting is that the originally envisioned
BRICs grouping by Goldman Sachs' Chief Economist Jim O'Neill has become a grouping in its own right. (Football fans, here's some trivia:
one of the Red Knights seeking to
rescue Manchester United from the vile Glazers is none other than longtime fan Jim O'Neill.) Aside from all being members of the
G-20, they seem to have interest as well in third world solidarity--that only goes so far, though. While China has become Brazil's largest trade partner, there is apparently anxiety as well on the part of Brazil over the value of the RMB. During the recent BRICs gathering that was cut short by Hu Jintao's need to return home because of the earthquake in the Tibetan region, currencies were kept
off the table due to the issue's emerging contentiousness:
Hu and Brazilian President Luiz Inacio Lula da Silva signed a five-year "action plan" aimed at boosting trade and energy cooperation. The two nations have grown closer amid a surge in commerce -- in 2009 China became Brazil's top trade partner...
Brazil and the other BRICs were not expected to risk fraying ties with China by pressuring it to allow the yuan to strengthen, despite concerns about the effect of cheap Chinese exports on their economies...They are not expected to push for a new international reserve currency to rival the dollar, an idea they discussed last year. As the largest holder of U.S. Treasury bonds, China is not keen to see the value of its investments diminish.
Although the meeting was meant to help establish a common position of the
upcoming G-20 finance minister's gathering, it appears the Brazilians are unable to keep themselves from prattling about--you guessed it--China's currency practices among
themselves. Although current central bank governor Henrique Meirelles obviously won't be heading to the Washington meeting from 22 to 23 April, he is vocal nonetheless:
A stronger Chinese currency is "critical" for the good of the global economy, Brazil's central bank chief Henrique Meirelles said on Tuesday, joining a chorus of critics of China's foreign exchange policy. Speculation that China may soon revalue its currency and unveil a long-awaited shift in its exchange rate has intensified in recent weeks, and the yuan is likely to figure in discussions at this week's Group of 20 meeting of finance officials in Washington.
"I think it's absolutely critical for the equilibrium of the world economy," Meirelles said when asked by a senator what the impact would be if China revalued its currency. Meirelles was speaking to the Senate's economic affairs committee before traveling to Washington where the spring meetings of the International Monetary Fund and the World Bank will also be held. "There are some distortions in world markets, one of them is a lack of growth and another is China," Meirelles said. "China's exchange rate is the result of the country's big savings ... this generates distortions for China itself..."
This month, Brazil's Finance Minister Guido Mantega waded into the debate when he said that a flexible currency policy in China "would be very good" for the global economy.
Last week, Brazilian President Luiz Inacio Lula da Silva met with his Chinese counterpart Hu Jintao in Brasilia at a summit of the so-called BRIC group of major emerging markets, which also includes Russia and India. But Lula did not mention the yuan, preferring to avoid fraying ties with Beijing over the issue. In a closed-door speech at that summit, Hu reiterated Beijing's long-standing official description of its yuan policy, saying that China remains on course to gradually put in place a managed floating exchange rate system.
Can Chinese gradualism meet with Brazilian approval? Wait and see.
