3RD LD: APEC calls for greater exchange rate flexibility in Asia

JEJU, South Korea, Sept. 9 Kyodo

(EDS: ADDING CHINESE FINANCE MINISTER'S COMMENTS IN 4TH-5TH GRAFS)

Pacific Rim finance ministers ended a two-day meeting Friday, calling for greater exchange rate flexibility in the region to address global current-account imbalances and increased policy coordination between oil producers and consumers to rein in soaring crude oil prices.

While welcoming recent steps by China and Malaysia to scrap their fixed currency systems, finance ministers from the Asia-Pacific Economic Cooperation forum said ''some economies'' should seek ''greater exchange rate flexibility,'' according to a joint statement issued after their talks on the South Korean resort island of Jeju.

The message is taken as a call on China to let the yuan's value rise to pursue greater flexibility in the country's exchange rate system over time, as requested by the United States and other Group of Seven nations.

Chinese Finance Minister Jin Renqing said after the meeting that a stable yuan will be good for China's economy, as well as for Asia's economy and the world economy.

China will carry out yuan reform in a gradual and controllable manner, Jin said in a news conference.

The APEC gathering was the first international economic meeting since China scrapped its decade-old dollar-pegged exchange system on July 21 and adopted a managed float linked to a basket of foreign currencies, resulting in a 2.1 percent revaluation of the yuan against the U.S. dollar.

On oil, the ministers from the 21-member APEC, which represents 60 percent of the global economic output, ''call for the dialogue between the oil-producing and -consuming countries to be strengthened through forums such as the International Energy Forum and the G-20,'' the statement said.

The IEF is a Riyadh-based forum for energy-producing and energy-consuming countries. The Group of 20 is a gathering for industrialized and emerging economies.

Crude oil prices are hovering near record highs and show few signs of abating, which the APEC ministers said pose ''risks'' to economic growth and ongoing development for the APEC economies, especially when the effects of Hurricane Katrina on the global oil markets are still being tallied.

The APEC ministers agreed on ''the importance of adequate investment in oil production and refining capacity, as well as technology transfer for energy conservation and developing renewable energy sources,'' the statement said.

The APEC ministers welcomed moves by Indonesia and other economies in the region to ''reduce demand-distorting subsidies'' and urged a ''continuation of these efforts'' to improve efficiency in energy use and encourage industries to adjust to global energy costs, the statement said.

Surging oil prices have sparked turmoil in Indonesia, sending the country's currency, the rupiah, to four-year lows against the dollar because swelling fuel subsidies are bleeding state coffers dry. Along with Indonesia, China and Malaysia are studying ways to reform their fuel subsidy programs to keep fuel affordable for the poor.

Meanwhile, the APEC ministers also noted that broader economic reforms are needed to ensure orderly adjustment of global imbalances, which they said would bolster stronger growth of the world economy in the medium term.

In this context, while calling for greater exchange rate flexibility in some economies, they urged the United States to cut government debts and increase national savings and Japan to ''further structural reforms,'' including improvements in debt-ridden finances, according to the statement.

The APEC ministers called for World Trade Organization member economies, including APEC economies, to make ''significant progress'' at a WTO ministerial meeting in December in Hong Kong to get the Doha Round of trade liberalization talks rolling, according to the statement.

They also urged all APEC members to ''pursue a meaningful outcome of the financial services negotiations'' in the Doha Round, it said.

The APEC meeting took place in the absence of the financial chiefs of the world's two largest economies -- the United States and Japan. U.S. Treasury Secretary John Snow and Japanese Finance Minister Sadakazu Tanigaki were tied up with domestic affairs and were represented by their deputies.

APEC members are Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, South Korea, the Philippines, Russia, Singapore, Taiwan, Thailand, the United States and Vietnam.

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