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G7 welcomes yuan move
Updated: 2005-09-24 09:11

Group of Seven nations, warning that high oil prices are a threat to global growth, called for stepped-up investment in refineries and welcomed a move toward greater currency flexibility by China.

In a statement issued after talks here, ministers and central bank chiefs from Britain, Canada, France, Germany, Italy, Japan and the United States said the outlook for the world economy was for "further growth".

"However, higher energy prices, growing global imbalances and rising protectionist pressures have increased the risks to the outlook," the G7 statement warned.

A European official said earlier that the group would send a delegation to oil-producing nations in mid-October to get a better grip on supply-and-demand problems.

The team will comprise French Finance Minister Thierry Breton, his British counterpart Gordon Brown and probably a senior US Treasury politician, the official said on condition of anonymity.

The rapid rise of oil prices to vertiginous heights has caused deep disquiet among the major industrial powers, whose energy-hungry economies risk a slowdown from more expensive crude and its accompanying inflation.

The G7 ministers hailed moves by the International Energy Agency, of which they are all members, and the OPEC cartel of producers to make more oil available to markets.

"Second, significant investment is needed in exploration, production, energy infrastructure and refinery capacity," they said in their statement.

"Third, oil-producing countries should ensure a favourable investment climate, open markets with transparent business practices and stable regulatory frameworks."

The ministers called also for more transparency in oil data to better gauge the role of speculators in driving crude prices to a recent high above 70 dollars a barrel.

They vowed to enhance dialogue with oil producers, and said "subsidies and artificial price caps which constrain the price of oil and oil products have an adverse effect on the global market and should be avoided".

The G7 ministers further said they supported better conservation of oil and the pursuit of renewable sources of energy "as long-term solutions".

Elsewhere the G7 welcomed China's latest currency reform as a move toward "greater flexibility" for an undervalued yuan.

"We welcome the recent decision by the Chinese authorites to pursue greater flexibility in their exchange rate regime," G7 finance ministers and central bankers said in a statement following a one-day meeting here.

"We expect the development of this more market-oriented system to improve the functioning and stability of the global economy and the international monetary system," said the statement, issued after China announced that its trading band for non-dollar currencies would be widened.

The G7 has long pressured China to allow its currency to appreciate, arguing that an undervalued yuan gave Chinese exports an unfair competitive advantage.

The ministers and central bankers in addition said they reaffirmed "that exchange rates should reflect economic fundamentals" and concluded that "excess volatility and disorderly movements in exchange rates are undesirable for economic growth."

They statement also reaffirmed a commitment made by the Group of Eight -- the G7 plus Russia -- to finance an initiative to cancel debts worth 40 billion dollars owed the World Bank, the IMF and the African Development Bank by some of the world's poorest nations.

The scheme was backed in principle at a G8 summit in July in Gleneagles, Scotland.

"We remain committed to fully financing this relief on a fair burden share basis and stand prepared to demonstrate our Gleneagles financial commitments consistent with our individual budgetary and parliamentary systems," the statement said.

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