G7 urges adjustment of Chinese exchange rate

Updated: 2007-02-11 10:47

ESSEN, Germany -- Finance ministers and central bank chiefs from the Group of Seven (G-7) industrialized nations on Saturday called for an adjustment of the Chinese exchange rate.

They made the remarks in a statement released after their meeting that opened on late Friday. The meeting focused on the development of capital markets in emerging market economies and other world economic issues.

The finance ministers and chief bankers said exchange rates should reflect economic fundamentals.

In emerging markets with large and growing current account surpluses, especially in China, it is desirable that their effective exchange rates move so that necessary adjustments will occur, the statement said.

The ministers from G-7, which comprises the United States, Britain, Canada, France, Germany, Italy and Japan, met with their counterparts from the five developing nations - China, Mexico, South Africa, India and Brazil.

The two-day meeting focused on fiscal policy, including consolidating macroeconomic stability, and the role of hedge funds in the stability of international financial markets.

The meeting in Essen is one of several meetings that will lead to the G-8 summit in the German Baltic Sea resort of Heiligendamm.

China implemented a managed floating national currency exchange rate mechanism on July 21, 2005, which is based on market supply and demand and is adjusted in relation to a basket of major foreign currencies.

Besides, China has already promised to adopt a more flexible exchange rate regime in the next few years, enlarging the floating band of its currency, according to the fourth quarter 2006 monetary policy report released by the People's Bank of China.

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