China, Saudi Arabia pledge to help cut global imbalances

Apr 14, 2007, 21:55 GMT

Washington - China and Saudi Arabia pledged Saturday to help ease global trade and financial imbalances that include the huge Chinese trade surplus with the United States.

The two countries agreed with the US, Japan and the 13 European nations using the euro that all had 'a shared responsibility' to reduce the imbalances without triggering a global economic crisis. Sustained imbalances could lead to protectionism, they warned.

The statement, issued after an International Monetary Fund meeting in Washington, partly reflected US-led pressure on China to revalue its currency and boost domestic demand to help reduce the US trade gap with China. The US is China's largest export market.

Saudi Arabia was included in the pledge because of its critical role as the world's largest oil exporter.

While imbalances have recently eased a bit, they remain 'very large,' IMF Managing Director Rodrigo de Rato told a news conference.

Saturday's statement offered the most detailed policy pledges yet since discussions on imbalances began under the IMF's umbrella last year, he said.

Each of the five powers listed specific policy plans aimed at reducing imbalances.

Saudi Arabia's projects include expanding oil production capacity, increasing oil refining and boosting natural gas processing. China said reducing its trade surplus is a 'major objective' for 2007 and pledged to 'achieve a rough external balance over time.'

All sides agreed 'that a rebalancing of domestic demand growth across economies would be key to reducing imbalances while sustaining the robust global expansion.'