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Last Updated: Saturday, 14 April 2007, 00:03 GMT 01:03 UK
G7 ministers confident on growth
G7 finance ministers ahead of Washington meeting
The G7 is looking at the contentious issue of hedge funds
Finance chiefs from the world's leading industrial nations say world growth will remain firm despite some risks.

The Group of Seven (G7) believes economic growth will hold steady, with the US economy solid despite moderating demand, and the euro zone healthy.

The International Monetary Fund (IMF) forecasts predict global growth of 4.9% in 2007 and 2008.

The Washington meeting of finance chiefs and central bankers is a prelude to wider IMF and World Bank talks.

Excess volatility

"Although risks remain, the global economy is having its strongest sustained expansion in more than 30 years and is becoming more balanced," the central bank presidents and finance ministers said in a joint statement.

US Treasury Secretary Henry Paulson, who led the talks, said that risks remained for the world economy.

He said these include high and volatile fuel prices, increased protectionist measures and the vulnerability of global financial markets.

But despite these risks, the G7 finance ministers said that the outlook for the world economy remained generally rosy, led by strong growth in Asia, driven by China and India.

Economic growth in the region is expected to come in at 7% this year, slightly down from the 7.4% growth experienced last year.

The ministers appealed to China to allow its yuan currency to trade more freely on global exchange markets, saying the excessive volatility was undesirable.

"In emerging economies with large and growing current account surpluses, especially China, it is desirable that their effective exchange rates move so that necessary adjustments can occur," the finance chiefs said.

Divisions remain

China is not attending the G7 session in Washington, as its ministers have done as guests on several occasions in the past.

The decision is thought to be linked to friction over an intellectual property rights row between Beijing and Washington.

The G7 ministers remained divided on a number of subjects - including currency volatility, protectionism and regulation of the trillion-dollar hedge fund industry.

Germany has been calling for tighter regulations to control hedge funds, claiming that should one major hedge fund collapse it could have severe consequences for global finances.

Over the past year, international concern has grown over the level of risk investors are exposed to by the lightly-regulated investment schemes, which as both high-return and high-risk are popular with wealthy investors.

However, both the US and IMF have resisted calls for tighter regulation of the sector, claiming that market forces are sufficient means to control it.

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