China's image improves as world economy slumps.
By Landon Thomas Jr.
ROME: As the world lurches ever deeper into economic distress, China's image is changing from that of currency manipulator to a source of badly needed consumer demand.
At the Group of 7 conference here over the weekend, finance ministers extended a friendly hand to the country many have criticized.
Veering sharply from his past testimony before the U.S. Congress, where he used harsh language in criticizing China's reluctance to let its currency, the yuan, appreciate, the new U.S. Treasury secretary, Timothy Geithner, was quick to commend China for its 4 trillion yuan, or $585 billion, stimulus package.
"We very much welcome the steps China has taken to strengthen domestic demand and its commitment to further exchange rate reform," he said during a news conference Saturday.
This view was echoed by the Group of 7's communiqué, which added that the yuan was "expected to appreciate in effective terms."
The quick shift in the G-7's stance toward China underscores how sharply policy positions are changing as the world economy continues to struggle.
It also is further proof of the diminishing stature of this once august group as it has become clear that large growing economies like China, India, Brazil and South Korea, which are part of the Group of 20 but not the G-7, will play defining roles in generating the purchasing power the global economy so desperately needs.
The G-7 session was Geithner's first official trip abroad as Treasury secretary. After the withering reception that his bank rescue plan received in Washington, he could be excused for seeing the event as a well-timed respite.
Geithner, whose previous job was president of the Federal Reserve Bank of New York, has spent his academic and professional life studying and implementing international financial policy. So, two days spent in Rome brainstorming with finance ministers from the Group of 7 industrialized nations about fixing the global economy plays to his specialty.
As one might expect in a gathering of diverse economies, there were differences of opinion.
Amid signs that Europe's worsening economic slump has created fissures among G-7 leaders about how to deal with the crisis, Geithner fielded questions from his peers about provisions viewed as protectionist in the stimulus package of the administration of President Barack Obama, as well as the debt needed to pay for it and the lack of detail in his bank rescue plan.
When it came to concrete measures to address the world slump, there was little offered, although the final statement did point to increased steps to inject liquidity and strengthen bank balance sheets.
"There are no quick fixes," said Alistair Darling, the British chancellor of the Exchequer.
As for how Geithner was received, the Treasury secretary said that while participants were happy that the United States was stepping forward, more was expected. "We all understand that the U.S. needs to be an influence for good," he added.
Geithner's trip to Rome - like much of his recent experience following his protracted confirmation process - was a whirlwind, crammed tight with meetings, dinners and, when he could squeeze it in, a trip to the gym.
