President Barack Obama's top economic adviser, Lawrence Summers, says he expects an agreement to be reached over currency adjustments this week when the leaders of the world's biggest economies gather at the G20 summit in Korea.
The G20 is taking place amid what some economists say is global currency war, with governments competing to weaken currencies and boost exports. And at the forefront of that fight are China and the U.S. Washington accuses Beijing of keeping its currency weak to drive its exports up and keep domestic consumption low.
China, on the other hand, says it is not to blame for the U.S.' trade deficit, and has been angered by the weak the U.S. dollar.
Summers, the head of the White House National Economic Council, says progress in resolving the issue will be made this week during the Group of 20 summit meeting in Seoul.
On Tuesday, Summers said that all G20 nations have a great stake in the process of global economic rebalancing, in particular the U.S. And, he points out, China also will benefit by allowing its currency to appreciate. "China has a remarkable opportunity to share the benefits of its prosperity with its people," Summers says. "And after a period when the share of Chinese total income devoted to consumption has quite steadily declined, there is a very attractive opportunity for China to rely more on domestic demand, to promote consumer spending and to enable its people to share more fully in its prosperity."
Summers spoke live over video-conference from Washington to a gathering of the Global Asia Society in Seoul. He was guarded about speculating on what type of conclusion world leaders will reach during the two-day summit, which begins Thursday. But he says there's no doubt that an agreement will be made. "I believe we are building the kind of consensus that will lead to necessary adjustments. I am confident that a satisfactory outcome will be reached."
The leaders of the 20 largest economies hope to find a consensus on how to avoid trade and currency wars, and keep the global economy growing. However, several governments in the G20, including China, have indicated they think the recent move by the U.S. Federal Reserve to increase cash in the U.S. banking system is harmful to other countries, and will not lift the sagging American economy.