Finance ministers from the Group of 20 major economies were to get together here later Friday to hammer out ways to resolve the simmering global currency row and set the agenda for next month's Seoul summit.
Before the two-day ministerial meeting opens, South Korean Finance Minister Yoon Jeung-hyun plans to hold bilateral talks with U.S. Treasury
Secretary Timothy Geithner and International Monetary Fund (IMF) Managing Director Dominique Strauss-Kahn to discuss currency policies and other issues, organizers said.
The currency issue is receiving keen international attention as the U.S., Japan, China and other major economies are locking horns over moves to tame their currencies amid the sputtering global economic recovery.
Coming into the meeting, Washington has made it clear that it wants other G-20 countries to get serious about letting currencies rise and fall freely in the market.
Washington has been pushing for numerical targets for the size of trade surpluses of countries, a proposal that is being rejected by China, India and even Germany, whose trade balances remain in the black.
The proposal, which the U.S. said can help reduce excessive trade imbalances that could compel the world to opt for protectionist policies, has reportedly been met with strong opposition.
China has rejected calls to revalue the yuan, but its central bank announced earlier in the week that it would raise its interest rate. The
move could strengthen the Chinese yuan and deflect criticism that Beijing is keeping its currency artificially weak to bolster exports.
Analysts said that if no compromise is reached on the matter, G-20 countries may tone down foreign exchange rates and trade-related parts of
the final communique.
South Korean officials, however, said they were rather optimistic that the finance ministers may reach a broad agreement not to engage in
competitive devaluation. This may be part of the joint communique to be released on Saturday.
A draft communique that leaked to the press Thursday claimed G-20 countries could agree to "refrain from competitive undervaluation" of their
currencies, and strive to move toward a more market-determined exchange-rate system.
Seoul officials said the G-20 policymakers also plan to take part in a session on controversial issues such as foreign exchange policies, reforming the IMF and setting new financial rules to better regulate the global
market.
On the final day of the talks, the G-20 representatives will also discuss IMF reforms; global financial safety nets; framework for strong, sustainable and balanced growth; and financial regulatory reforms, they said.
On IMF reforms, including a change in its governance structure, insiders here said little serious headway is likely to take place since there is stiff resistance from advanced industrialized countries that have to give up
their stakes in the organization. They speculated that this matter may be concluded when leaders meet for the G-20 summit in Seoul on Nov. 11-12.
Local experts, meanwhile, claim that the G-20 countries have generally endorsed the "Korea Initiative," which aims to provide swift relief to
fundamentally sound countries temporarily under a liquidity crunch under a broad financial safety net arrangement.
In addition, the G-20 members have roughly concurred that there is a need for better oversight of systemic risks for governments to maintain a fiscal balance and for rigorous supervision of so-called significantly important
financial institutions, whose collapse could send shock waves throughout the world, according to them.
Despite generally upbeat predictions, some sources in Gyeongju said an accord at the end of the two-day-long talks may be rhetorical, since sharp differences have emerged between the United States and developing economies on ways to reduce excessive trade imbalances.