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South Korea’s Lee Expects G-20 Accord on Currency Disputes

Lee Myung Bak, South Korea's president
Lee Myung Bak, South Korea's president. Source: Yonhap News via Bloomberg

Nov. 3 (Bloomberg) -- South Korean President Lee Myung Bak said he expects Group of 20 leaders including Chinese President Hu Jintao to agree on “guidelines” for currency policy when they meet in Seoul next week.

The leaders will discuss how to reduce global trade imbalances by assessing current-account positions, following up on an agreement reached at an Oct. 23 meeting of G-20 finance chiefs last month in Gyeongju, South Korea, Lee said. The accord fell short of endorsing a U.S. proposal for current-account targets.

“I believe leaders will be able to reach some kind of agreement,” Lee told reporters today in Seoul, where the G-20 summit will be held on Nov. 11-12. “I expect positive cooperation from President Hu Jintao at the leaders’ summit.”

The G-20 finance ministers agreed to refrain from “competitive devaluation” and to let markets set exchange rates more. It was the first time the economic policy makers took a joint stance on exchange rates, having previous resisted doing so out of concerns it would alienate China.

China faces demands from Western nations to let the yuan rise more quickly at a time when the U.S. is trying to trim its trade deficit and European nations are attempting to stem losses of manufacturing jobs. While China has kept the yuan’s rise to about 2 percent since a June pledge to increase flexibility, the Japanese yen has climbed 15 percent against the dollar this year, the Thai baht 12 percent and the Malaysian ringgit 11 percent.

Won Advances

The Korean won’s 6.4 percent gain in the third quarter helped slow economic growth to 0.7 percent from a 1.4 percent expansion in the previous three months. Exports account for about 40 percent of South Korea’s gross domestic product, making it the second-most export-dependent economy within the G-20 bloc after Saudi Arabia, according to data from the International Monetary Fund.

“The Chinese government is actively participating in the global drive to reduce imbalances,” Lee said today.

Lee said on Nov. 1 the currency issue will be on top of the agenda when G-20 leaders meet in Seoul.

Lee, who ran South Korea’s largest construction company before entering politics, is also spurring discussions at the summit on ways to increase growth in developing nations. South Korea has become Asia’s fourth-largest economy less than six decades after the 1950-53 war.

The G-20 leaders will come up with an “action plan” on ways to aid developing nations, to be assessed every year on how it was implemented, Lee said.

“The North Korean regime can also get this kind of support if it decides to join the international community,” he said. “It is entirely up to the North Korean government.”

To contact the reporter on this story: Bomi Lim in Seoul at blim30@bloomberg.net

To contact the editor responsible for this story: Bill Austin at billaustin@bloomberg.net

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