Economy

APEC biz elites call for focus on fundamentals

(Xinhua)
Updated: 2011-02-17 16:04
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GUANGZHOU - When business leaders from Asia Pacific Economic Cooperation (APEC) economies met in China's southern province of Guangdong to discuss economic issues, many did not list currency rates as the topic they were most concerned about.

"I'd like to set aside the currency issue and look more at economic fundamentals," said Kevin R. Thieneman, president of Caterpillar Asia Private Limited. The executive spoke to Xinhua on the sidelines of the first APEC Business Advisory Council (ABAC) 2011 meeting, which started Tuesday in the provincial capital of Guangzhou.

After three days of closed-door discussions, 200 business elites from different industries in 21 APEC economies will sum up their advice on Thursday in a report for APEC leaders that will be discussed in a meeting in Hawaii later this year.

Though brawling on exchange rates still continues in the region, Thieneman noted that the United States and China, both are APEC members, have more serious issues to tackle. He added that the United States needs to reduce its debts while China needs to bolster domestic consumption to assure the economy is more balanced.

"My message to APEC leaders is to bring down all the trade barriers, making it easier to do business and to make business more competitive," said Thieneman, who leads Caterpillar's expansion in one of the world's fastest growing markets.

For decades, Caterpillar, the world's largest producer of construction and mining equipment based in the United States, had pushed for free and open trade in the region, citing the benefits of creating jobs to solve the problem of low economic growth and high unemployment worldwide.

But debates over exchange rates were common in recent years.

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According to an economic outlook report from the ABAC Finance and Economics Working Group, the divergence in growth between "advanced economies" and "developing and emerging economies" will become apparent in the APEC region, leading to continuous tension over exchange rates within the region.

Hoang Van Dung, the first vice chairman and executive vice president of the Vietnam Chamber of Commerce and Industry, told Xinhua that exchange rates have a significant role in economic development in different countries.

"But the prime task for the Vietnamese government this year is to stabilize the economy and bring down the inflation level," he said.

Despite soaring prices, Vietnam, an APEC member, devalued its currency by 8.5 percent last week to help boost exports and narrow the country's trade deficit, which has also weighed on the currency. Weaker currencies make a nation's exports more competitive abroad while making imports more expensive.

Other economies in the region, however, have allowed their currencies to gradually appreciate in the past years. Malaysia's ringgit is trading at a 13-year high against the U.S. dollar. The currencies of Thailand, the Philippines and Singapore have also seen sharp rises over the past two years. China's currency, the renminbi or yuan, also reached an all-time high of 6.5849 per U.S. dollar last week.

The People's Bank of China, the central bank, announced in June last year that it would further reform the exchange rate formation mechanism to improve its flexibility. Since June last year, the yuan had appreciated by 3.7 percent. The yuan had strengthened against the U.S. dollar by more than 25 percent since 2005, when China ended the currency's peg to the dollar in July 2005.

"From country to country, the situation is different. Many countries have severe problems of inflation, such as Laos and Cambodia," said Yoshihiro Watanabe, an advisor for the Bank of Tokyo-Mitsubishi UFJ Ltd. "As for China, it is in a moderate position to control inflation as the Chinese central bank has already changed the monetary policy (from moderately easy to prudent) and the domestic demand control is now in effect."

Watanabe said that the gradual appreciation of the Chinese currency was helpful in controlling inflation. He added that China's efforts to curb inflation would contribute to the world's management of inflation.

"I believe the Chinese economic system needs more time to open everything. (China's) banking system is not efficient enough at this moment, unlike the U.S. and Japan. I think it's better to (open up the system) gradually," he said.

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