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UPDATE 1-China ratchets up pressure after U.S. Fed move

Published 11/08/2010, 02:44 AM
Updated 11/08/2010, 02:48 AM

* China official takes aim at U.S. monetary easing

* Official says U.S. needs to recognise responsibility

* Says easing sets off money flows that are financial shock (Recasts, adds quotes, details)

BEIJING, Nov 8 (Reuters) - China ratcheted up pressure on Washington over the U.S. Fed's latest moves to lift its economy by printing more money, with a vice finance minister saying resulting hot money inflows were a shock to global markets.

In the run-up to this week's G20 and APEC meetings, a number of leading economies have warned against the Federal Reserve's decision last week to inject an extra $600 billion into the U.S. banking system.

"As a major reserve currency issuer, for the United States to launch a second round of quantitative easing at this time, we feel that it did not recognise its responsibility to stabilise global markets and did not think about the impact of excessive liquidity on emerging markets," Chinese Vice Finance Minister Zhu Guangyao said at a briefing on Monday.

Zhu said that China plans "frank discussions" with the United States over its money printing plans.

China and the United States had turned down the heat in the acrimonious dispute over currencies and trade imbalances at a meeting of finance ministers from the 21-member Asia-Pacific Economic Cooperation (APEC) forum over the weekend.

But Zhu said on Monday that the Fed's quantitative easing was a poor decision. He said the United States must recognise its role and responsibility in the global economy.

A leading Chinese newspaper warned on Monday that Washington's actions were a form of indirect currency manipulation that could lead to a new round of currency wars and even global economic collapse. [ID:nTOE6A601T]

For his part, Federal Reserve Chairman Ben Bernanke in recent days has been defending the bond-buying, saying the measures to help restore a strong U.S. economy were critical for global financial stability. [ID:nN06139568]

Despite the heated rhetoric aimed at U.S. economic policymakers, Zhu predicted on Monday that the G20 meeting would send a positive signal to global markets.

"We, including the Federal Reserve, will strengthen coordination of and communication about macroeconomic policies and monetary policies."

He said the current global situation was different from that at the height of the global financial crisis.

"Financial markets do not lack capital, but the capital lacks confidence in the real economy," he said. (Reporting by Simon Rabinovitch and Langi Chiang; Writing by Ben Blanchard; Editing by Ken Wills)

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