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Finance Ministers Discuss Demands for Increase in Value of China's Currency

The under-valuation of China's currency is at the center of Friday's meeting in Washington of finance ministers from seven industrial countries. VOA's Barry Wood has more.

With their currencies up strongly against the dollar, the Europeans and Canadians have joined with the Americans in insisting that China allow its currency to more rapidly appreciate.

The Canadian and European Finance Ministers made their deicision Friday at the meeting of seven finance ministers (US, UK, Germany, France, Italy, Japan and Canada) at the U.S. Treasury.

China tightly controls the exchange rate of the Yuan and has allowed it to rise by less than four percent this year. By contrast the euro is up nine percent and the Canadian dollar 20 percent against the US currency. Europeans say their exporters are losing competitiveness, because of the euro's advance.

The ministers also discussed the world economic outlook-in particular the recessionary implications of record high oil prices, global imbalances and recent turbulence in financial markets. The gathering, in advance of the (October 20-21) annual meeting of the International Monetary Fund and World Bank, was hosted by US Treasury Secretary Henry Paulson.

Charles Dallara, the head of the Institute of International Finance-an association of the world's biggest banks, says currency revaluation is in China's own interest.

"The Chinese people themselves yearn for greater prosperity, which could be realized-or could be facilitated, let me put it this way-by stronger domestic demand, which in turn can be facilitated by a more flexible exchange rate regime," he said.

The IMF has similarly ratcheted up its criticism of China's tightly controlled exchange rate, saying directly that the Yuan is undervalued.

Aided by a weak currency, China's trade surplus has doubled in recent months to 400 billion dollars, an amount equal to 12 percent of gross domestic product. China's foreign currency reserves total a record $1.4 trillion.

Fred Bergsten, director of the Peterson Institute, an economic research agency, says the Yuan is undervalued by 30 percent globally and 40 percent against the US dollar.