MercoPress. South Atlantic News Agency

G 7 demand more exchange rate flexibility for China's Yuan

China became the worlds fourth largest economy

Finance ministers and bankers from the Group of Seven leading industrialized countries, G7, renewed pressure on China to relax controls over its currency. China promised more flexibility but gave no indication of time or percentages.

Beijing needs to speed-up efforts to improve the exchange rate flexibility of its Yuan currency, G7 ministers said at the end of their meeting in Germany, which has been interpreted as a victory for United States. G7 also sounded an upbeat note over prospects for the global economy, forecasting growth of 5% this year and declared confidence in Japan's recent economic recovery in spite of Tokyo's fears of persistent deflation. In a statement at the close of discussions in the German city of Essen, the G7 added that they believed the US economy remained solid, while key European economies were improving their performance. G7 is made up of Canada, Britain, France, Germany, Italy, Japan and United States. China was especially invited to the debates. Other nations participating include Russia, Mexico, Brazil, India and South Africa. The Chinese Yuan and the Japanese Yen were among the main talking points at gathering. China, which recently became the world's fourth largest economy ahead of Britain, said it wanted the Yuan to be more flexible. Beijing has been accused of undervaluing its currency, making Chinese exports artificially competitive on the global market. "In emerging economies with large and growing current account surpluses, especially China, it is desirable that their effective exchange rates move so that necessary adjustments will occur," the G7 said in a communiqué at the close of the meeting last weekend. Responding, China's finance minister, Jin Renqing, said his country would "continue to strengthen macroeconomic adjustments". Japan has also been accused of undervaluing its currency, but speaking before the gathering Japanese Finance Minister Koji Omi said the yen's current low value simply reflected the country's ongoing economic recovery. G7 warned against the potential dangers "carry trades" posed, where investors borrow vast amounts in low-yield currencies - such as the yen â€" (basic rate stands at 0.25%) to reinvest for a profit elsewhere.