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Saturday, 16 September 2006, 22:47 GMT 23:47 UK

G7 calls for China yuan rethink

By Andrew Walker
Economics correspondent, BBC News

G7 finance ministers in Singapore The Group of Seven (G7) main industrialised nations has called on China to make its currency policies more flexible.

At a meeting in Singapore, G7 finance ministers also said there was a danger of rising protectionism in world trade.

The G7 was meeting ahead of the annual gatherings of the International Monetary Fund (IMF) and World Bank.

The IMF has forecast strong global growth but is wary of trade imbalances, hence the G7's renewed plea to China.

The US has a large deficit in its international trade; China and other Asian countries have large surpluses.

China allows only limited movement in its currency, the yuan.

Many think that a more flexible approach would make China less competitive and so reduce the US trade deficit.

Voting system

The G7 also noted a danger of what it called "protectionist tendencies".

Many see the possibility of a move to more barriers in international commerce since World Trade Organisation negotiations were suspended in July.

The G7 statement also called for IMF member countries to support proposals to reform the organisation's voting system.

They are considering proposals to increase the shares of China, South Korea, Turkey and Mexico and also to start a wider review of how the shares are calculated.

Some developing nations have expressed reservations, but the proposals are thought likely to be approved.




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