G20 meeting: tricky decisions will take time

So the US thought China would yield that easily?
The communiqué of the latest G20 meeting in Seoul has asserted that the 2nd largest economy of the world enjoys sufficient clout to prevent any sweeping decision from taking place - especially when it comes to its currency.
Slow appreciation of Chinas Yuan, which is blowing up the countrys trade surplus, and the US Feds launch of a quantitative easing of $600 billion were the two main themes in opposition, forming the basis of the finger-pointing game between the two sides.
But the tides are quite skewed in Chinas favour. Ironically, 55 percent of Chinas export is contributed by foreign-owned companies, which strongly resist a sharp revaluation of the Renminbi, according to Yao Yang, director of the China Centre for Economic Research, Peking University.
The allegations that mainly the Chinese economy gets to reap the fruit of an undervalued Yuan do not hold much ground in light of this fact.
In addition, while Chinas undervalued currency has drawn a lot of attention because of the size of its economy, other prominent Asian economies such as South Korea and Japan will also be reluctant to stand in opposition to China, as a revaluation of the Renminbi will also put pressure on their currencies to appreciate.
So the possibility of trade sanctions against the giant country appears quite grim.
But China is not merely being a stubborn spoilsport in refusing to bow down to US pressures - the decision is a very tricky one for the country, especially after the Feds quantitative easing stance.
If China allows its currency to rise very quickly, the profitability of its export-based companies will be hit terribly. Yang claims that even a 20 percent appreciation will have minimal impact on the US economy, and China, on the other hand, will see employment and GDP drop by over 3 percent.
The latest easing by the US Fed has driven a lot of speculative money into the Chinese economy, and risks of asset bubbles and inflation reign high. The 25 basis point increase in interest rates in China in October, mainly in order to tranquilise inflation, only further stoked speculative flows into the country.
So the dynamics are quite precarious for China, and an overnight solution through a G20 meeting is more of a juvenile fantasy.
Drastic changes will bring about drastic results - a rapid appreciation of the Renminbi is not the optimal solution and hence China will likely keep its defences high, even in the further G20 meetings to come.
Therefore, it wasn any surprise that the issue of currency-led-global-imbalances did not see any concrete development in the Asia-Pacific Economic Cooperation meeting either.
The idealism is rightfully highlighted in the words of IMF Chief Strauss-Kahn regarding the message of the G20 held in Seoul - "We should not expect the debate to be concluded at once."