France woos China over currency talks

France and China have been in talks for the past year over whether there should be heightened co-ordination of exchange rates to promote stability of the international monetary system in the wake of the financial crisis.

The talks and their content have been kept secret, in an attempt to draw China into a discussion on global currency co-ordination, a subject that Beijing has been reluctant to countenance in the past.

France has long advocated greater global economic governance. This summer, in a speech to French ambassadors on France’s priorities for the G20, Mr Sarkozy called for a “new framework for discussing currency movements”.In an ambitious move reminiscent of the currency accords of the 1980s, President Nicolas Sarkozy hopes to open a debate on the subject when France takes over the presidency of the G20 group of leading nations in November, according to people familiar with the matter.

Mr Sarkozy is hoping to win Chinese support for a common approach during discussions with Hu Jintao in November, when the Chinese president visits Paris.

The move comes against the background of rising concern over exchange-rate interventions by a host of countries, most notably China but also Japan and South Korea, to prevent their currencies from rising against the dollar.

Though China has recently allowed the renminbi to appreciate modestly, the US House of Representatives passed a bill this week allowing the adm inistration toimpose duties on Chinese imports because of currency undervaluation.

The bill must pass the Senate and be approved by President Barack Obama before it becomes law, but its initial passage reflects growing anger in Congress. China, which is on track to surpass Japan this year as the world’s second-largest economy, has resisted pressure for years, especially from the US, for substantial appreciation of its currency.

People familiar with the matter said France wanted to open the debate during the G20, rather than push a particular view, and was not proposing fixing rates. One priority would be to identify which institution should deal with global currency issues, the sources said.

Mr Sarkozy is planning to discuss currency co-ordination with Mr Obama when he next visits Washington. Germany too will be approached, and the subject may be raised when Mr Sarkozy meets Angela Merkel, German chancellor, in Deauville on France’s Normandy coast this month.

The French and German leaders are set to meet Dmitry Medvedev, Russian president, to discuss joint security concerns and priorities for the G20.