G7 Invitation Signals Belated Recognition Of Chinese Power

PARIS, Sept 23 (AFP) - An invitation to China from Group of Seven finance ministers to join them at a meeting in Washington next week signals a belated recognition of Beijing as a force to be reckoned with in the global economy.
US Treasury Under Secretary John Taylor, announcing the move Wednesday, called the planned October 1 meeting "historic."
Chinese representatives will join finance ministers and central bank governors from Britain, Canada, France, Germany, Italy, Japan and the United States at a dinner following the scheduled G7 session Friday.
The encounter comes just ahead of annual meetings on the week end of the International Monetary Fund and the World Bank.
Taylor described China's attendance at the dinner as a "natural occurrence," as Beijing is becoming an increasingly important component of the global economy.
Additionally, some G7 officials and analysts hope that allowing China into G7 consultations will enable the Chinese economy to become more deeply integrated into the international financial system -- notably by shifting the yuan to a floating exchange regime and speeding up deregulation in the country.
Taylor said there was already movement toward flexible exchange rates on the part of China.
"They are moving, and they have indicated that they intend to move toward flexible exchange rate."
In Paris, the presence of Chinese officials in Washington is not seen as heralding China's official admission to the ranks of the G7.
There is no "notion of regularity behind this," said one French finance ministry source.
"The United States is far from thinking that it is necessary to expand the G7," he added, noting that "the question of expanding to include Russia has not yet been dealt with."
But he said the G7 was indeed interested in talking to China about trade as well as Beijing's economic growth rate and its impact on oil and other commodities markets.
Economists nonetheless believe that a closer relationship between China and the major western economic powers is inevitable.
"It is a first step, clearly," commented Lorenzo Codogno of the Bank of America in London.
"I think over time there is no doubt that China will end up as a superpower among the major countries of the world, and it's just a matter of time.
"I think China is particularly important nowadays because we know that China has been the engine of growth in Asia," he said, noting that 70 percent of percent of Japan's exports are destined for the Chinese market.
Such a market, he continued, clearly affects world inflation trends.
"It's no wonder that they invited China."
At the Societe Generale bank here Olivier Gasnier said: "We can easily see the impact that China now has on the world economy.
"We cannot continue to tend to our affairs on the quiet, we are eventually going to have to tie these new economies more closely to the decision-making process."
Meeting in Dubai in September 2003, the G7 appealed to China to allow its currency to adopt a more flexible exchange rate mechanism, an overture ignored in Beijing.
The United States has been putting some pressure on China to drop the peg that ties the value of the yuan to the US dollar.
Chinese officials have agreed in principle that market forces should determine exchange rates but have said China's financial system is not yet strong enough for a fully floating yuan.
With presidential elections looming in November, the Chinese yuan has become a hot topic in the United States. Many US politicians blame it for being undervalued, boosting exports and making imports more expensive and thereby costing US jobs.
The yuan has been pegged at 8.28 to the US dollar for a decade, with no adjustments to reflect monumental changes in the economies of China and the world.