Chinese dragon to fire up G20 summit
Jacqueline Thorpe - November 13, 2008
The Group of 20 summit in Washington this weekend has nostalgically been dubbed Bretton Woods II in a nod to the historic 1944 gathering in New Hampshire that laid the groundwork for the postwar economic order.
While the G20 is keen on hammering out a new financial order for the 21st-century global economy, one of the key elements of the original Bretton Woods Agreement is unlikely to get more than a passing glance — currencies.
The cornerstone of Bretton Woods was a fixed exchange rate system designed to prevent the “beggar-thy-neighbour” currency devaluations that wreaked havoc on the global economy in the 1930s. The system broke down in the 1970s, and currencies have been the Achilles heel of the global economy ever since.
Today is no exception. While presidents and prime ministers get set to tinker with new global regulations and promise to pour more stimulus into a beaten-down global economy, the 10,000-pound dragon in the summit room will surely be China’s insistence on maintaining a weak currency to boost export growth, and the bulging war chest of foreign exchange reserves around the world.
China, its BRIC brothers — Brazil, Russia, India — and other emerging powers may have won a seat at the summit table but the global economy has still not figured how to absorb their growing might without major disruption.