Gyeongju, South Korea (FT) -- Washington has taken a fresh line of attack in attempts to get Beijing to allow its currency to appreciate, calling for the G20 group of leading economies to agree a cap on current account surpluses.
The U.S. has long sought faster and sustained appreciation of the renminbi but Beijing has consistently resisted specific targets.
In order to break this impasse, Timothy Geithner, U.S. Treasury secretary, said G20 finance ministers, meeting in the South Korean city of Gyeongju on Friday, should commit to limit trade deficits and surpluses that create imbalances in the global economy.
"G20 countries with persistent surpluses should undertake structural, fiscal and exchange rate policies to boost domestic sources of growth and support global demand," Mr Geithner wrote in a letter to G20 ministers that was circulated among reporters.
Still, much of Mr Geithner's language was tailored to the challenge posed by the renminbi. By building up domestic demand and increasing imports, China would be inclined to allow a faster strengthening of its currency.
"Emerging market countries with significantly undervalued currencies and adequate precautionary reserves need to allow their exchange rates to adjust fully over time to levels consistent with economic fundamentals," he added.
G20 officials on Friday said the U.S. initially proposed that trade surpluses should be capped at 4 per cent of gross domestic product.
One senior G20 official said the letter, drafted after a proposal from South Korea, would not come as a shock to the Chinese because financial officials had been sounding out Beijing in earlier meetings.
CNN
