Asia-Pacific governments were expected on Thursday to stick with economic stimulus plans and make a joint call for market-oriented exchange rates to ensure the fragile recovery under way can be sustained.
Finance ministers from the Asia Pacific Economic Cooperation (APEC) forum met in Singapore to discuss strengthening the post-crisis global economy to prevent asset bubbles and excess leverage with prudent macroeconomic and regulatory policies.
We agreed on the crucial role that supportive fiscal measures in the APEC region had played in avoiding an even deeper global recession and resolved to remain vigilant until the economic recovery gains traction, they said in the latest draft of a statement to be issued after their meeting on Thursday.
They also called for market-oriented exchange rates, echoing rhetoric coming from Washington, which is concerned about the dollar's decline and wants Beijing in particular to take steps to allow the yuan to appreciate more rapidly.
The 21-member Pacific Rim group includes China, which has effectively pegged its currency against the dollar since the middle of 2008 to help fend off the global downturn.
We will undertake monetary policies consistent with price stability in the context of market-oriented exchange rates that reflect underlying economic fundamentals, the draft said.
U.S. President Barack Obama told Reuters in an interview this week that he would raise the currency issue on a visit to China next week. His administration says an undervalued yuan is one factor contributing to economic imbalances between the first- and third-biggest economies in the world.
China's central bank said on Wednesday it will consider major currencies in guiding the yuan, suggesting a departure from the effective dollar peg.
I'd say that ... is the most significant news we've had on the yuan for months, and that APEC is more of a formal reminder from China's closest neighbors, not just the U.S. and Europe, that forex rigidity in a huge trading economy is not a domestic issue, said Westpac Banking Corporation forex strategist Sean Callow.
WARNING OF ECONOMIC FALSE DAWN
The ministers' declaration also backed stimulus measures governments have put in place around the Pacific rim, including an estimated $1 trillion in Asia alone and $787 billion in the United States.
Australian Treasurer Wayne Swan told reporters before going into the APEC meeting: What we have to do is to make sure that we don't withdraw global support too early.
In Australia's case, our economic stimulus peaked in the middle of this year and is being gradually withdrawn as we go through the rest of the year, Swan said.
World Trade Organization Director General Pascal Lamy cautioned of a false dawn in the recovery.
There's certainly a recovery happening, certainly in this region, which has suffered less from the crisis than from other regions of the planet, he told CNBC in an interview on the APEC sidelines in Singapore. But I would be prudent whether or not this would be sustainable six months or a year from now.
He said rising unemployment was the main threat to free trade and could spark greater protectionist policies around the globe.
Jobless queues have jumped across the industrialized world since the global economic crisis erupted a year ago and have been a prime reason nervous governments have resisted calls to start winding back stimulus measures.
The U.S. jobless rate hit a 26- year high of 10.2 percent in October and economists polled by Reuters expect it to rise to 10.5 percent by the middle of next year.
CLIMATE TAKES BACK SEAT
APEC foreign, trade and finance ministers all met in Singapore ahead of a summit of their leaders this weekend focused on avoiding future crises, whether financial or climactic.
APEC is dominated by members of the Group of 20, including the United States, Russia, Japan and China, which has supplanted the Group of Seven as the premier forum for global policy making.
Diplomats expect discussion on the sidelines on how to bring North Korea back to talks on ending its nuclear arms program, and the United States' decision to engage Myanmar's junta is also expected to come into focus.
The APEC meeting represents one of the final opportunities ahead of next month's Copenhagen summit for leaders to overcome differences on the shape of a climate pact to fight rising seas, more chaotic weather and threats to crops and livelihoods.
However, there is little prospect of any new initiatives emerging in Singapore this weekend and the climate agenda might instead focus on liberalizing trade in green goods and services.
APEC member economies account for 40 percent of the world's population across four continents, more than half of global gross domestic product and nearly half of world trade.
But their members range from relatively poor countries such as Papua New Guinea, Peru and the Philippines, emerging markets such as Indonesia, Thailand and Malaysia, and rich economies, including the United States and Japan.
(Writing by John Chalmers; Additional reporting by Nopporn Wong-Anan, Glenn Sommerville and Vidya Ranganathan; Editing by Dean Yates)