Currencies set to dominate G20 summit agenda

media captionPresident Obama hoped the agreement will "help us track and encourage balanced and sustainable growth"

The world's leading economies have begun a summit in South Korea, with currency policies set to dominate the agenda.

There are fears the G20 meeting in Seoul could descend into a row between the US and China about so-called "currency wars" and trade imbalances.

Ahead of the meeting, US President Barack Obama urged leaders to work together for global economic recovery.

He also defended the US's policy of pumping $600bn into the economy.

"In a prudent, stable way, we want to make sure that we are boosting growth rates at home as well as abroad," Mr Obama said of the policy announced last week designed to kick-start the US economy's fragile recovery.

"It is difficult to do that if we start seeing the huge imbalances redevelop that helped to contribute to the crisis that we just went through."

The US and South Korea also announced that they had failed to seal a free trade deal, in talks ahead of the main G20 meeting.

The pact was agreed three years ago, but has since stalled over US lawmakers' concerns about access to South Korean markets for US beef and cars.

In a joint news conference with the South Korean president, Mr Obama said the final communique of the G20 summit would include mechanisms to promote balanced and sustainable international economic growth.

Washington has blamed these in part on Beijing's alleged manipulation of its currency to help boost Chinese exports, which has led to Beijing amassing huge foreign reserves.

media captionRobert Zoellick stressed the need to be wary of "protectionism" sparked by tension over currency wars

Others, however, say America's economic policies, specifically creating new money to pursue quantitative easing (QE), could also be a form of currency manipulation for its own ends.

Speaking to the BBC, the president of the World Bank, Robert Zoellick, said there were "definitely tensions" over currency.

"One has to be wary of the tensions because you don't want them to slip into protectionism," he said.

But he said that while the US raising the issue over China was "useful", he added China's next five-year plan for its economic development would focus on increasing domestic demand, adding this would be important in shifting China's growth.

Accused of forcing the dollar down to trade its way back to prosperity, Mr Obama is due to hold one-on-one talks with two of the strongest critics of his administration's economic direction - Chinese President Hu Jintao and German Chancellor Angela Merkel.

President Obama has said that the US alone could not restore growth but accepted the US must change, adding: "When all nations do their part... we all benefit from higher growth."

He has argued that correcting global trade imbalances is key to securing long-term economic stability. He says the world can no longer rely on US consumers to drive economic growth, while China must focus more on boosting domestic demand, rather than relying on exports.

And he again called on countries not to rely on exports to pull them out of their economic problems.

"Just as the United States must change, so too must those economies that have previously relied on exports to offset weaknesses in their own demand," Mr Obama said.

Brazilian President Luiz Inacio Lula da Silva warned that the consequences of relying on exports would be severe.

"If [rich nations] don't consume, and they just bet on exports, the world will go into bankruptcy," he said.

Britain's Prime Minister David Cameron also warned that China should act to correct its trade imbalance.

Critics, especially in the US, have called for tariffs on Chinese imports unless the yuan is allowed to appreciate.

It is feared that other countries will rush to allow currency devaluation to also make their exports more competitive.

But China considers the exchange rate of its currency to be an internal matter and has agreed to only gradually let the yuan appreciate.

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