THE US struggled yesterday to win backing for a proposal to set limits on external imbalances as a way of pressing countries with surpluses such as China to let their exchange rates rise.

In a letter to fellow finance ministers of the Group of 20 leading economies, US treasury secretary Timothy Geithner said countries should implement policies to reduce their current account imbalances below a specified share of national output.

Japanese finance minister Yoshihiko Noda said Mr Geithner, backed by host South Korea, proposed limiting surpluses and deficits on the current account to 4 per cent of gross domestic product.

However, the plan met with a cool reception on the first day of a two-day meeting meant to smooth the path for a G20 summit in Seoul next month. Big exporting countries that habitually run chunky trade surpluses led the opposition.

A G20 source said China was against any limits on imbalances, German economy minister Rainer Bruederle warned of a throwback to “planned economy thinking”, and Russian deputy finance minister Dmitry Pankin said a draft communiqué to be issued today would steer clear of numerical targets.

“The communiqué is very politically correct. There’s nothing sharp in it,” Mr Pankin said. – (Reuters)