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China is determined to let yuan float ... someday
By Sumeet Desai and Stella Dawson
Reuters
Saturday, February 5, 2005
http://www.reuters.com/newsArticle.jhtml?type=topNews&storyID=7547048
LONDON -- The Group of Seven wealthy nations pledged to increase
Third World debt relief on Saturday but a deal struck after major
disagreements fell short of proposals floated by British finance
minister Gordon Brown.
"We are willing to provide as much as 100 percent debt relief on all
multi-lateral debt for individual HIPC countries," Brown told a news
conference, referring to dozens of Highly Indebted Poor Countries,
most of them in Africa.
"It is the rich countries hearing the voices of the poor...showing
that no injustice can last forever," he said.
Brown, who chaired the G7 talks, had pushed for a complete write-off
of African debt and a doubling of aid to $100 billion a year but the
latter proposal ran into U.S. opposition and there was no agreement
on it.
Sub-Saharan Africa owes around $70 billion to multilateral lenders
such as the World Bank and International Monetary Fund and Brown said
these public agencies would now have to come up with plans on how to
deliver on the debt relief pledge.
Washington had also objected to his proposal to use IMF gold reserves
to fund the debt writeoff and to a new financing mechanism that would
double aid. A G7 communique said the IMF would produce ideas on this
front by April.
G7 nations are under intense pressure to deliver on promises to rid
Africa of poverty by 2015, the so-called Millennium Development Goals.
"We will make particular efforts in the case of Africa, which on
current rates of progress will not meet any of the Millennium
Development Goals by 2015," the communique said.
Brown had wanted approval for his International Finance Facility
(IFF) scheme to double aid to Africa to $100 billion a year but got
no U.S. backing and others were cautious too.
The compromise deal followed an emotional appeal from South Africa's
Nelson Mandela in London, where he equated the fight against poverty
to the struggle against apartheid.
"Do not delay while poor people continue to suffer," the 86-year-old
former political prisoner said, demanding a full debt write-off and
$50 billion extra a year as Brown proposed.
U.S. Treasury Under Secretary John Taylor said he disagreed with the
Brown plan, under which rich countries would provide guarantees to
raise money in the capital markets and use gold reserves to fund a
debt writeoff.
In the wake of the U.S. opposition, Italy and Germany pushed for
something less ambitious but backed the principle.
The G7 comprises the United States, Japan, Germany, Britain, France,
Italy, and Canada.
The bulk of the meeting was devoted to the Third World but the
ministers also discussed ways of reducing volatility in the oil
market after prices hit record highs last October.
They also discussed currency management and economic risks and did
not stray from a year-old policy statement which called for less
volatile currency markets and greater exchange rate flexibility.
The latter point is aimed mainly at China, which sent its finance
minister and central bank officials to meet G7 members.
"We are determined to move toward a flexible exchange rate, but no
timetable," Chinese central bank deputy governor Li Ruogu told
reporters after breakfast talks.
Beijing says it is not going to rush into altering its yuan peg to
the dollar, which many say keeps the yuan artificially low and makes
life unfairly difficult for other trading nations.
"We discussed the issue of exchange rate flexibility with China,"
Brown said. "We are all interested in the role China is playing in
the global economy."
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