Finance Minister Jim Flaherty heads to China this week with a new spin on an old message.
A long-time critic of China's unwillingness to let the yuan fluctuate, Canada, like the United States, has dropped the tough talk. Instead, Canada now puts the same demand in a more positive light for China.
On the eve of this weekend's meeting of Group of 20 finance ministers in South Korea, Mr. Flaherty's decision to visit China beforehand underscores the ever-growing influence of China in global economic policy.
Canada now paints its currency request as a win-win proposition: continued Chinese infrastructure and program spending - coupled with a rise in the yuan - will allow China to boost the purchasing power of its own citizens while helping the global economy at a time of broad-based government cuts.
That is the position outlined by one of Mr. Flaherty's senior Finance officials Monday, in a media briefing in advance of the G20 leaders' summit in Toronto. The official called it a plan to "rotate demand," a recognition that the uneven world economy requires its members to act in different ways based on their own circumstances.
The unknown is whether the mighty Chinese economy - built largely on the export of goods - can carry the load as a consumer market. Facing concerns that China may already be running too hot in light of rising wages, house prices and inflation generally, Chinese officials recently stepped in with new banking regulations focused on property markets.
Mr. Flaherty will be joined in China by Trade Minister Peter Van Loan for the latest in a string of official Canadian visits to China in recent months - including Prime Minister Stephen Harper's visit in December.
Paul Evans, director of the Institute of Asian Research at the University of British Columbia, said Canada's recognition of China's influence in the G20 shows the Harper government's approach to China is entering a third phase.
When first elected in 2006, there was open and strong criticism of China, but Dr. Evans said that policy changed after the 2008 election as Canada increasingly cultivated China as a trading partner.
"This new phase is evolving and it's evolving fairly quickly," he said. "This is the key phase now. This is not just dealing with China as a trading partner. This is dealing with China as a determiner of the economic architecture of the future."
Mr. Flaherty will co-host the meeting in Busan, which will be the last formal G20 gathering before the June 26-27 leaders' summit in Toronto. He will be joined in Busan by Bank of Canada Governor Mark Carney.
The Finance official said the Busan meeting will include talks toward a united G20 effort to phase out some incentives for fossil fuels. Another key point of discussion will be on calls - primarily from Europe and the United States - for some form of international tax on banks that would ensure a large pool of cash is available should there ever be a future need for governments to bail out financial markets.
The Canadian official said there is strong support for Canada's opposition to a global bank tax and growing interest in a competing proposal from Canada that would force banks to keep "contingent capital" on hand in the event of a cash crunch.
In Shanghai Wednesday, Mr. Flaherty is scheduled to welcome the one millionth visitor to the Canada Pavilion at Expo 2010. He also has meetings scheduled in China with Finance Minister Xie Xuren and Zhou Xiaochuan, the governor of the Peoples' Bank of China.Report Typo/Error