MNI

By Denny Gulino

WASHINGTON (MNI) - Treasury Secretary Jack Lew, in his own statement after the day's G20 meeting, chose to include some high-profile praise for China and to keep silent on the Japan stimulus program a senior department official earlier said the U.S. is watching closely for signs of competitive currency devaluation.

"This is not a time for complacency," Lew said. "Strengthening global demand is imperative and must be at the top of our agenda."

In repeating his call for stronger growth policies, he focused that emphasis on Europe to a greater extent than did the G-20 in its own communique earlier in the day. The G20 kept its growth declarations within a broader global context.

"It is vital," he said, "to see rebalancing within the euro area with surplus economies contributing more to demand in order to ease the periphery's adjustment process, avoid austerity fatigue, and renew Europe's economic vibrancy."

Lew's language about the euro zone was consistent with what Treasury officials have been repeating since before he toured Europe earlier this month a few days after being sworn in to office.

Overall, Lew's statement, being delivered to the IMF's Monetary and Financial Committee meeting Saturday, appeared similar to what he would have delivered to reporters late Friday had he not earlier in the day canceled the customary explanation of U.S. views about the G20's discussions.

An official said the unfolding Boston situation had intervened, preventing Lew's scheduled news conference, but gave no details of what part Lew is playing in the Boston situation.

If there was anything mildly unexpected in Lew's post-G20 comments, it was the highlighted praise aimed at China, increasing the emphasis on the positive beyond that of Lew's two most recent predecessors.

"Some progress has been made" in China, he said. That country "already recognizes the need to transition away from excessive reliance on domestic investment and exports to a new model with Chinese consumers playing a growing role in driving demand."

He said China's current account surplus has fallen from 10.1 percent of GDP in 2007 to 2.3 percent last year. Exchange rate appreciation, a frequently underlined sore point in U.S.-China relations in the past, has now "played an important role in reducing China's surplus," he said.

Lew did add that the process of exchange rate adjustment in China "remains incomplete and more progress is needed," a moderated version of past admonitions.

"Sustaining this progress will require further efforts to boost household demand and reinvigorate the move to market determination of the exchange rate and interest rates," Lew said.

Lew's silence about Japan in his statement to his counterparts from around the world seemed to soften somewhat the emphasis placed only hours earlier by a senior Treasury official. The official had reiterated in response to a question from MNI that the U.S. will be watching closely to see if the expansion of quantitative easing in Japan actually does more to boost demand and inflation than it does to depreciate the yen.

The communique repeated the G20 pledge to "refrain from competitive devaluation and will not target our exchange rates for competitive purposes."

--MNI Washington Bureau; tel: +1 202-371-2121; email: dgulino@mni-news.com

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