China and US closer on trade targets

Financial Times:

China and the US have the basis for an agreement at the summit of the Group of 20 leading nations next month on setting targets to cut trade imbalances, according to an adviser to the Chinese central bank.

Li Daokui, a member of the central bank’s monetary policy committee and professor at Tsinghua University, said on Tuesday there had been “good progress” at the weekend meeting of G20 finance ministers in South Korea which had moved debate from the “surface issue” of nominal exchange rates to “talking about the substance of rebalancing world trade”.

“China should not be afraid of numerical targets for reducing its trade surplus,” said Mr Li in an interview. “China is well positioned politically and economically to make this adjustment.”

China has pushed back strongly against US pressure for a rapid appreciation of its currency, the political and economic dispute at the heart of fears about a global “currency war”.

However, although Mr Li is an adviser to the central bank rather than a policymaker, his comments suggest support in China for the US proposal of setting limits on current account surpluses and deficits at around 4 per cent of GDP.

“I was very encouraged by the G20 meeting,” said Mr Li. “It is now possible for the two governments [the US and China] and other governments to have a good understanding.”

Several articles in the Chinese business press have also indicated the government would be comfortable with the surplus target at that level.