The BRICS group of emerging-market powers kept up the pressure for a revamped global monetary system that relies less on the US dollar and for a louder voice in international financial institutions.
The leaders of Brazil, Russia, India, China and South Africa also called for stronger regulation of commodity derivatives to dampen excessive volatility in food and energy prices, which they said posed new risks for the recovery of the world economy.
Meeting on the southern Chinese island of Hainan, they said the recent financial crisis had exposed the inadequacies of the current monetary order, which has the dollar as its linchpin.
What was needed, they said in a statement, was a broad-based international reserve currency system providing stability and certainty - thinly veiled criticism of what the BRICS see as Washington's neglect of its global monetary responsibilities.
The BRICS are worried that US's large trade and budget deficits will eventually debase the dollar. They also begrudge the financial and political privileges that come with being the leading reserve currency.
The world economy is undergoing profound and complex changes, Chinese President Hu Jintao said. The era demands that the BRICS countries strengthen dialogue and cooperation.
In another dig at the dollar, the development banks of the five BRICS nations agreed to establish mutual credit lines denominated in their local currencies, not the US currency.
The head of China Development Bank (CDB), Chen Yuan, said he was prepared to lend up to 10 billion Yuan to fellow BRICS, and his Russian counterpart said he was looking to borrow the Yuan equivalent of at least 500 million USD via CDB.
The call by the BRICS group for a new monetary order is not new. But, coming hours before a meeting in Washington of finance ministers from the Group of Seven industrial nations, the traditional power brokers of the world economy, Thursday’s communiqué showed the growing confidence of emerging markets.
Burdened by heavy debt, the United States, the Euro zone and Japan are struggling to shake off the lingering effects of the 2008 global financial crisis. Rich countries will grow 2.4% this year and 2.6% in 2012, the IMF forecast this week. By contrast, less well-off countries have emerged relatively unscathed. The IMF is forecasting that emerging and developing countries will grow 6.5% both this year and next.
The quality and the durability of the global economic recovery process depend to a great measure on how the BRICS economies perform, Indian Prime Minister Manmohan Singh said.
The leaders reviewed the global role of the Special Drawing Right, the IMF accounting unit and reserve asset, which some experts believe could grow into a partial substitute for the dollar. But they stepped around the issue of whether the Yuan should join the SDR, saying only that they welcomed discussion of the composition of the SDR basket of currencies.
A member-country official said the group was split on whether China's currency, which cannot be freely exchanged except for trade and investment purposes, met the criteria for being part of the SDR.
There is a need for a broad-basing of the international monetary system. The SDR is an instrument to do that, but we still have no unanimity on the inclusion of the Chinese currency in the SDR as of now said the official.
The SDR now comprises the dollar, the euro, the Japanese yen and the British pound.
India and Brazil’s position is that the Yuan should be convertible first.
Though keen on a more diverse global monetary order, Beijing has given no indication that it is ready to make the Yuan freely tradable or to dismantle capital controls as the price for the prestige of being part of the SDR.