China and Japan agreed on Sunday they will jointly respond to any funding request from the International Monetary Fund, which is looking to more than double the size of its war chest to help countries deal with the Eurozone sovereign-debt crisis.
After meetings with Chinese Vice Premier Wang Qishan and Finance Minister Xie Xuren, Japanese Finance Minister Jun Azumi said the two countries were ready to support the IMF but that further efforts by Eurozone members were necessary.
What we agreed on ... is that European countries need to do more, although [the situation], including Greece, is headed in a good direction, Azumi told reporters in Beijing. We can expect some sort of request from the IMF to [countries] including the United States, Japan, and China. We agreed that Japan and China will coordinate closely and will jointly respond to IMF.
The IMF is seeking to raise $600 billion in new resources to help deal with the Eurozone debt crisis, but countries outside the 17-country euro bloc want to see its members contribute more money before they commit additional resources to the IMF.
Azumi said the two sides did not discuss the specific size of any funding support for the IMF, although a Japanese finance ministry official said Tokyo was willing to commit a sizable amount.
The idea is Japan and China will coordinate, not compete, on any IMF action, the official said, adding that both countries were fully aware of their importance in dealing with the crisis.
Consistently reluctant to make firm financial commitments, China is seen as having the financial firepower to bail out some European governments, given its $3.2 trillion in foreign-exchange reserves.
Earlier this month, Chinese Premier Wen Jiabao said his country is considering increasing its participation in the European rescue funds and is still studying how it might go about doing it, which may involve the IMF.
More Flexible Yuan
China's official Xinhua news agency quoted Vice Premier Wang Qishan as telling Azumi that China and Japan must proactively study local currency settlement for trade and investment and should further enhance financial coordination.
China has become Japan's biggest export destination and No.1 trading partner, taking over from the United States. Trade between the two countries expanded 14 percent to a record high $344.91 billion in 2011, boosted by a rise in Chinese exports to this neighbor, according to the Japan External Trade Organization.
However, the bulk of trade between the world's second-largest and third-largest economies is currently settled in dollars, due in large part to financial regulations and market custom.
As part of efforts to promote direct exchanges of the yen and the yuan, which would lower currency risks and settlement costs, Japan hopes to eventually set up an offshore yuan settlement center in Tokyo, joining other countries such as Britain and Singapore that are seeking a share of the growing offshore yuan business.
Azumi said he told the Chinese side: If the yen and yuan are to be settled directly, a more flexible and an international yuan will be needed. ... Since China is a major player in the global economy, I hope China will take that into consideration and be more flexible [in its currency policy].
(Reporting by Kazunori Takada; Editing by Sanjeev Miglani)