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September 26, 2009

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G20 set to give China more world stage clout

The Group of 20 will become the forum for global economic management, giving rising powers such as China more clout and rolling out tougher rules on bank capital by the end of 2012, a draft communique said yesterday.

Ensuring and sustaining economic recovery topped the agenda at the two-day Pittsburgh summit of the world's richest nations and emerging powers such as China, India and Brazil.

The G20 countries, which account for 90 percent of the world's output, vowed to keep emergency economic support in place until a recovery was secured, according to the draft communique.

The group also agreed to rein in financial industry excesses that triggered the credit crisis.

Tighter rules on how much capital banks must have to absorb losses should be ready by the end of 2010 and will be phased in during the following two years, the draft communique said.

The document also tackled the contentious issue of bankers' pay schemes, blamed for fostering a high-risk corporate culture that led to heavy losses and taxpayer-funded bailouts.

It suggested linking pay to "long-term value creation, not excessive risk-taking."

The draft did not mention direct caps on pay, as proposed by some European leaders. French officials said the summit had not reached a final accord on executive pay.

The document said the G20 would try to secure a deal next year in long-running world trade talks. Similar pledges have been made at a number of international gatherings, so far without result.

In another boost for countries such as China and India, the G20 unexpectedly moved close to a deal shifting more voting power at the International Monetary Fund to some developing countries, recognizing their growing clout.

In return, the draft communique suggested, the G20 won their commitment to do their part in rebalancing the world economy.

That rebalancing act involves the debt-laden United States saving more and export powerhouse China consuming more.

The draft said G20 countries with either "sustained, significant" surpluses pledged to "strengthen domestic sources of growth."

By the same token, countries with big deficits pledged to support private savings.

The draft showed leaders endorsed an agreement on phasing out subsidies for fossil fuels to help combat global warming, but with no fixed date for the change.


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