beyondbrics

By Leslie Hook in Hong Kong

Chinese President Hu Jintao sounded bearish notes about the current state of the global economic recovery at the G20 summit in Toronto this past weekend while deflecting criticism over the value of the renminbi.

Hu warned “that the recovery was unfirmly established, unbalanced, and still facing ‘quite many uncertainties,’ such as the expanding sovereign debt crisis, drastic exchange rates fluctuations of major currencies and persistent volatility in the international financial markets,” according to state-run news agency Xinhua.

China won plaudits at the Toronto meeting for its decision to de-peg the renminbi from the dollar and allow more flexibility in its exchange rate. On Monday, China’s central bank set the mid-point for trading the renminbi against the dollar to its highest value in years, at Rmb6.7890. A sentence in the draft summit declaration that praised China’s new currency policy was removed from the final version of the document at Beijing’s request.

Hu’s speech in Toronto did not touch on the renminbi, but hinted at Beijing’s concern over the role of the US dollar as the world’s reserve currency. “The G20 nations need to … strengthen supervision over macroeconomic policies of various parties, particularly major reserve currency issuing economies,” he said. Chinese officials in the past have expressed concern over the long-term value of the US dollar, an issue of key concern as China holds more than $2,000bn in US dollar-denominated reserves.

The Chinese president also touted China’s stimulus efforts, pointing out the rebalancing in China’s economy during the global financial crisis. “In 2009, while China’s total exports in goods dropped by 16 per cent, its retail sales were up by nearly 17 per cent in real terms, fixed assets investment increased by about 30 per cent, and the current account surplus relative to GDP fell to 6.1 per cent,” Hu said.

Hu not only earned praise from other G20 leaders over China’s currency revaluation, he also scored an invitation from US President Barack Obama for a state visit to Washington. It will be the first time Mr. Hu has received the ceremonial honour of a state dinner at the White House.