Ahead of the meeting of finance ministers from G-20 countries here, the United States on Wednesday said emerging countries like China and India needs to play a much larger role in the global economy.
"With weakened demand in advanced economies, China and other emerging markets must necessarily play a bigger role in bolstering global demand or see overall growth slow," a senior Treasury Official said ahead of the G-20 finance ministers' meeting on the sidelines of the annual meeting of the International Monetary Fund and the World Bank.
"I think we believe that emerging markets have a very important role to play, particularly at a moment where advanced economies have weakening demand.
"There's a lot of domestic consumption that is coming on line in countries like India, like China," the Treasury official, who declined to be named, said in response to a question.
"Countries like China can do more to bring it on line by allowing more movement in the exchange rate. And of course, that's something that India is already very much aligned with and supporting," the official said.
"The emerging markets, especially those with large current account surpluses, have substantial capacity to strengthen domestic demand and pivot more rapidly away from an exports-reliant growth strategy.
"Greater exchange rate flexibility is a central instrument for accomplishing this shift to domestic demand-led
"As you know, since China announced its return to currency flexibility in June of 2010, the renminbi has appreciated against the dollar by about 7 per cent in nominal terms, 10 per cent in real terms," the official said.
"It's a welcome step, but the RMB remains substantially undervalued and allowing further adjustment in the currency will both provide more favourable conditions for other emerging markets to allow their exchange rates to move, as well as counter inflationary pressures in the domestic economy," the Treasury official said.
According to the Treasury official, the finance ministers' meeting will cover the main topics for the Cannes summit that the G-20 have been working on, which will focus on food security.
Several members of the G-20, including emerging markets, have put resources behind the Global Agriculture and Food Security Programme, where the World Bank and the African Development Bank are working hard to improve agricultural productivity.
"A second area of emphasis of course will be on infrastructure investments, which was highlighted in the Seoul Summit Declaration as an area where many of the countries in the G-20 have good experiences to bring to bear, as well as, again, highlighting the vital role of the World Bank and the regional development banks," the official said.
"There'll be a variety of other topics there as well, but those will be highlighted," he said.
