Excerpt
At a private dinner on Friday at the Canadian Embassy, finance officials from seven world economic powers focused on the most vexing international economic problem facing the Obama administration.
Over seared scallops and beef tenderloin, Treasury Secretary Timothy F. Geithner urged his counterparts from Europe, Canada and Japan to help persuade China to let its currency, the renminbi, rise in value — a crucial element in redressing the trade imbalances that are threatening recovery around the world.
But the next afternoon, the annual meetings of the International Monetary Fund ended with a tepid statement that made only fleeting and indirect references to the simmering currency tensions.
The divergence between the mounting anxieties over Chinese policy and the cautious official response was a striking display of the difficulty of securing international economic cooperation, two years after the financial crisis began.
Above all, officials say, the crisis has shifted influence from the richest powers toward Asia and Latin America, whose economies have weathered the recession much better than those of the United States, Europe and Japan.
“We have come to the end of a model where seven advanced economies can make decisions for the world without the emerging countries,” said one European official involved in the weekend talks. “Like it or not, we simply have to accept it.”
The debate over currency valuation is pivotal. World leaders broadly agree that for the global economy to be more stable, imbalances between creditor countries like China and Germany and debtor countries like the United States and Britain have to be fixed. Correcting those imbalances, some economists say, will help create jobs in the United States and reduce the threat of inflation and asset bubbles in China.
Bold emphasis mine
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