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September 24, 2009

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China backs US call for economic balance

CHINA offered some support yesterday to US plans to build a more balanced global economy, as world leaders seek to agree on ways to nurture a tentative recovery and prevent future crises.

The European Union unveiled its blueprint for an overhaul of the way banks and financial markets are policed, with plans for a banking super-watchdog and a pan-European supervisor that it hopes can be replicated on the global stage.

Leaders of the Group of 20 countries were set to meet in Pittsburgh, Pennsylvania, today and tomorrow, their third gathering since the collapse of investment bank Lehman Brothers a year ago. Their focus is now shifting from combating the worst recession since the 1930s to discussing how to prevent it from happening again.

Central to the talks will be a US plan to correct the world's economic imbalances by shrinking surpluses in big exporting countries like China and boosting savings in debt-laden nations including the US.

US President Barack Obama wants a framework of "mutual assessment" where the International Monetary Fund would make policy recommendations on rebalancing to the G20 every six months, according to a paper obtained by Reuters.

"We approve of countries strengthening their macroeconomic policy coordination and together pushing forward the sustainable and balanced development of the world economy," China's Foreign Ministry said.

The EU said its proposed banking super-watchdog would have the power to overrule individual countries, such as Britain, which is fighting to keep control over the centerpiece of its economy, the City of London financial center.

"Our aim is to protect European taxpayers from a repeat of the dark days of autumn 2008, when governments had to pour billions of euros into the banks," European Commission President Jose Manuel Barroso said in a statement.

"The European system can also inspire a global one and we will argue for that in Pittsburgh," he said.

Also up for discussion in Pittsburgh will be reforms to the IMF, trade policy, and global warming. Developing nations are becoming increasingly vocal in calling for a greater role at international bodies like the IMF.


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