Deputy Prime Minister and Minister of Strategy and Finance Hyun Oh-seok held bilateral talks with counterparts from China, Germany, Russia, Australia, India, Turkey, the US, and IMF Managing Director Largarde at the G20 Finance Ministers and Central Bank Governors’ Meeting held in Moscow, July 19-20.

Meeting with Chinese Finance Minister Lou Jiwei

Deputy Prime Minister Hyun and Minister Jiwei reviewed recent economic outcomes pertaining to the two countries, including the recent Korea-China Leaders’ Summit where the Korea-China bilateral swap was extended. Both Ministers regarded recent progress as a symbol of deepening economic cooperation between the two countries.

Both ministers discussed the possibility of negative spillover effects, such as interest rate spikes and capital flow volatility, arising from the exit from unconventional monetary policy by major countries. The two ministers expressed sympathy for international cooperation in order to minimize risks pertaining to tapering quantitative easing, and agreed to strengthen cooperation between the two countries, such as by cooperating at the G20-level. Deputy Prime Minister Hyun expressed his concerns regarding a hasty US exit from easy monetary policy and its effect on increasing financial anxieties and slowing down the real economy. Minister Jiwei was sympathetic to the Deputy Prime Minister’s position.

Both ministers recognized the need to remain faithful to the agreements made at the April G20 Finance Ministers’ Meeting in Washington, which recognized that Japan’s monetary stimulus was not aimed at creating a competitive advantage over other countries, but rather was designed to boost domestic demand, and the two ministers recognized that the Japanese government is responsible for implementing policies to promote sustainable growth through structural reforms and by strengthening fiscal soundness.

Meeting with German Finance Minister Wolfgang Schauble

Deputy Prime Minister Hyun also brought up the issue of negative spillover effects from an exit to quantitative easing in the US with German Federal Minister of Finance Wolfgang Schauble while emphasizing that each country should make contributions in order to ensure that the direction of major countries’ monetary policy changes in a gradual manner.

Moreover, the Deputy Prime Minister emphasized that international cooperation, including a review of financial safety nets, as opposed to individual policies, was required as financial market volatility is expanding due to the possibility of tapering quantitative easing. The Deputy Prime Minister emphasized the importance of regional financial arrangements (RFA), and communication channels to share RFA experience and lessons and prevent moral hazards. Deputy Prime Minister Hyun asked for Germany’s support regarding RFA cooperation in order to send positive signals to the markets.

Both ministers also exchanged opinions regarding the current economic situation and policies of each country.

Both ministers recognized the importance of employment and agreed to strengthen bilateral cooperation, such as by sharing experience, in order to boost the employment rate.

Meeting with Russian Finance Minister Anton Siluanov

Deputy Prime Minister Hyun met with Russian Finance Minister Anton Siluanov and requested that Korea and Russia work together to accomplish the tasks* discussed at the Korea-Russia Joint Committee Meeting that was held on July 9.
*Tasks include entering Far East and Siberian markets and developing North Pole trade routes.

Deputy Prime Minister Hyun also brought up the issue of negative spillover effects owing to tapering quantitative easing and that advanced economies can also experience reverse spillover effects. The Deputy Prime Minister emphasized the importance of cooperation among emerging economies, such as through macroeconomic policy measures that respond to the expansion in capital flows.

Deputy Prime Minister Hyun regretted the fact that the conclusion of IMF quota reform, which had been agreed upon at the 2010 Seoul Leaders’ Summit, has been delayed, and expressed that he expects IMF quota reform will be accomplished soon.

Meeting with IMF Managing Director Christine Lagarde

Deputy Prime Minister Hyun discussed the IMF’s recent WEO Update report, released last April, which again downgraded global economic growth forecasts. Both Managing Director Lagarde and the Deputy Prime Minister expressed concerns regarding the continuing economic slowdown following the April report, and expressed sympathy for advanced economies supporting short-term growth through macroeconomic policies and the necessity for emerging economies to develop crisis management systems.

Managing Director Lagarde expressed concern regarding recent talks of exiting unconventional monetary policy and Korea’s recent financial/foreign exchange market situation. Deputy Prime Minister Hyun said that a very cautious response is required, despite Korea handling the current crisis better than past crises.

Meeting with Australian Treasurer Chris Bowen

Deputy Prime Minister Hyun informed Mr. Bowen of the major policy goals of the Park Geun-hye Administration and both sides agreed to strengthen bilateral cooperation between Korea and Australia.

Both ministers noted the importance of international cooperation at the G20 level to prevent tax evasion. Deputy Prime Minister Hyun informed Mr. Bowen of Korea’s efforts to expand revenue sources without raising taxes, and stated openly that close cooperation at the global level was crucial for solving the tax evasion problem.

Mr. Bowen was sympathetic to the importance of base erosion and profit shifting, which was discussed at the meeting, and both ministers agreed that in-depth discussions regarding this matter must continue at the G20 level.

Meeting with Indian Finance Minister Palaniappan Chidambaram

Deputy Prime Minister Hyun expressed concerns regarding tapering quantitative easing, sustainable growth and risk management, and emphasized the need for in-depth discussions at the G20-level regarding strengthening macroeconomic soundness. Deputy Prime Minister Hyun brought up the issue of negative spillover effects arising due to tapering quantitative easing, such as interest rate spikes and expanding capital flow volatility, and raised the concern that these effects may ultimately come back to hurt advanced countries through reverse spillovers.

Minister Chidambaram said that tapering quantitative easing by the US Fed had had a strong negative influence of India as both ministers expressed the opinion that international cooperation was necessary to minimize negative spillover effects.

Deputy Prime Minister Hyun also emphasized the importance of strengthening global financial safety nets, specifically the important role that RFAs, such as the Chiang Mai Initiative Multilateralization (CMIM), can play. The Deputy Prime Minister requested India’s support regarding communication channel improvements that Korea proposed in order to take the first step in sharing RFA experience.

Meeting with Turkish Deputy Prime Minister Ali Babacan

Deputy Prime Minister Hyun thanked Turkey, the chair of the G20s International Financial Architecture (IFA) Working Group, for supporting Korea’s call for RFA communication channel improvements and requested that Turkey contribute to concluding a definitive agreement at the September G20 Leaders’ Summit. Turkish Deputy Prime Minister Babacan raised the issue of recent capital flow volatility in Turkey’s financial markets and asked for Korea’s support in strengthening the role of RFAs in order to be able to respond to crises.

Both ministers agreed to work to strengthen cooperation in order to develop the Korea-Turkey Vice Ministers’ Meeting, held in Seoul, into a regularly-occurring dialogue between the two nations.

Meeting with US Secretary of Treasury Jack Lew

Deputy Prime Minister Hyun exchanged opinions with Secretary Lew regarding the global economic outlook and recent capital flow volatility in financial markets. Both countries agreed to closely cooperate in order to ensure financial stability and sustainable global economic growth.

Both countries are dealing with North Korea’s nuclear development program and promised to participate in international efforts, such as by faithfully complying with UN Security Council resolutions. Secretary Lew informed Deputy Prime Minister Hyun of US efforts to make progress on the UN Security Council’s resolution by imposing sanctions on North Korea entities that support or participate in the development of North Korea’s halted nuclear program and the proliferation of nuclear weapons.

Both ministers agreed to do their best to cooperate at a global level in order to peacefully put a stop to Iran’s nuclear development program. Deputy Prime Minister Hyun pointed out that the US’ strict sanctions on Iran were hurting small and medium-sized Korean business’ exports to Iran. Both Ministers agreed to add this issue to the agenda of the vice ministerial meeting that will soon be held between the two countries.

*Government press release (July 20)