In a virtual disapproval of China’s recent devaluation of yuan that
triggered shocks in the global economy, world’s 20 big economies today
called for moving towards market-determined currency rates and resist
from competitive devaluation
“We reiterate our commitment to move toward more market-determined
exchange rate systems and exchange rate flexibility to reflect
underlying fundamentals, and avoid persistent exchange rate
misalignments.
“We will refrain from competitive devaluations, and resist all forms of
protectionism,” said the communique issued at the end of the two-day
meeting of the G20 Finance Ministers and Central Bank Governors.
The statement did not name China but it comes against the backdrop of
unsettling currency devaluation done by China recently that sent markets
globally into a tailspin.
The G20 countries reaffirmed the role of macroeconomic and structural policies to achieve strong, sustainable and balanced growth
Terming devaluation of currencies as a “worrisome trend”, RBI Governor
Raghuram Rajan said China’s move to devalue its currency and to
protect its stock markets raise questions about the ‘true strength’ of
the world’s second largest economy.
“I think more generally across the globe, because of a weak demand,
we’ve seen significant efforts to depreciate currency, you can call it
monetary policy or direct exchange rate intervention. That’s a worrisome
trend.
“The Chinese move raised some questions about the true strength of its
economy also,” Rajan said, speaking at the second SBI Banking and
Economics Conclave.
He added that China has moved on various fronts beyond the currency, including protecting its stock markets.
Moves like these, where countries devalue currencies due to low demand,
can lead to a “free for all” at the global stage, said Rajan, who is
known for his frank views on the global economy.
Rajan, who is credited to have seen the global financial crisis of
2007-08 coming, said that rupee has been among the more stable
currencies the world over, although it has also depreciated a bit
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