The upcoming meet of G-20 finance officials this week will see Indian and Brazilian central bank governors fully backing the American stand on Chinese currency revaluation. Though the recently concluded BRICS summit at Brasilia this past week passed off smoothly enough for the Chinese with host Brazil and other participants Russia, India and South Africa too polite to broach the issue one-on-one with visiting Chinese president Hu Jintao, who in any case made an early exit with a massive earthquake striking parts of China, the gloves are likely to be off at Washington this week.
G-20 finance ministers and central bank governors will meet in Washington on Friday to discuss financial regulatory reform. They will also work on a plan to avoid a return to global current account imbalances that contributed to the recent financial crisis.
Firing a warning shot across China's bows was Indian central bank governor D Subbarao, who said exports from China to his country had grown faster than Indian exports to China, ''and that obviously is a reflection of differences in the exchange-rate management,'' he told reporters in Mumbai.
Also in the fray was Brazil's Henrique Meirelles who told a senate hearing yesterday in Brasilia it was ''absolutely critical'' that China should let its currency appreciate. "I think it's absolutely critical for the equilibrium of the world economy," he said when queried about the likely global impact should China revalue its currency.
US president Barack Obama has already accused China of maintaining its currency at ''artificial'' rates, and has just held back from officially declaring the communist giant as a currency manipulator through a Treasury Department report. Publication of the report was held back by the American government in the interest of diplomacy as Chinese president Hu Jintao was visiting Washington to attend a nuclear security summit in April and it was decided to give diplomacy a chance.
Finance officials from G-20 nations will discuss outlook for the global economy in Washington for three days starting 22 April.
Reserve Bank of India governor Subbarao said India will give its opinion if the issue is raised in the G-20 meeting. ''When it is discussed we will certainly give our opinion or view on the subject,'' he said.
''If China revalues the yuan, it will have a positive impact on our external sector,'' Subbarao said. ''If some countries manage their exchange rate and keep them artificially low, the burden of adjustment falls on some countries that do not manage their exchange rate so actively.''
After allowing it to appreciate a paltry 21 per cent in three years, China has pegged its currency at about 6.83 against the dollar since July 2008.
Finance officials from Brazil and India would certainly have cause to worry as the Brazilian real has gained 28 per cent against the yuan in the past year, even as the rupee has climbed 13 per cent.
India imported $14.9 billion of goods in the six months to September 2009 from China, even as it own exports to this communist-ruled nation amount to a bare $3.9 billion over the same period.
Brazil has ample cause to worry as China's exports to countries in its immediate neighbourhood - Argentina, Uruguay and Paraguay- went up 7.3 per cent to $4.8 billion in the first eight months of 2009 as compared to two years earlier, even as Brazilian exports to same countries fell 18 per cent to $9.6 billion over the same period.
So far China is putting up determined resistance in the face of concerted international pressure to revalue the yuan. Chinese president Hu Jintao told Obama in course of the nuclear summit that his country wouldn't yield to ''external pressure'' in deciding when to adjust the yuan.