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Major reserve-currency economies must carry out responsible policies and keep their exchange rates relatively stable: Hu Jintao.

November 11, 2010 (Hamsayeh.Net) - China tells the US to implement more responsible economic policies at the time when global economy faces difficulties. Speaking at the summit of G20 being held in Seoul, South Korea amidst popular demonstrations, Chinese President Hu Jintao urged Washington to avoid policies that could lead to a currency or trade war among competitive economies. 

Hu Jintao said, ‘Major reserve-currency economies must carry out responsible policies and keep their exchange rates relatively stable.’ He added, ‘the world community should improve the framework for strong, sustainable and balanced growth and promote cooperative development... champion open trade and promote coordinated development.’ 

Last week US Federal Reserve announced plans to inject $600 billion additional unsupported liquidity into the US economy also known as QE2. The FED aims at a quick remedy to boost economic activities thus increase consumer demands. At the same time QE2 is expected to lower the value of dollar as compared to other major currencies, giving US exporters additional incentives to export their products more cheaply.  

The QE2 also signals the beginning of a currency war in which competing economies will try to lower their own currencies leading to a certain crash of the existing global trading system.   

Not only China fears US currency manipulations but last week Germany also issued a warning to Washington that it must avoid adopting policies that harm the world economy.

The QE2 policy implemented by US federal Reserve signals the beginning of a major global currency war.