LONDON — Canada will likely discuss hedge fund regulation and supervision with its Group of Seven partners later this month but sees no need for global or multilateral regulation of the sector.
In an interview with Reuters, Canadian finance minister Jim Flaherty said he didn't share the concern over the largely unregulated $2-trillion (U.S.) sector expressed by some European G7 nations, most notably this year's G7 chair Germany.
“There's less concern in North America than in some parts of Europe about hedge funds. It's really a transparency issue. I know there is some concern in some quarters about the perceived lack of transparency and a desire to regulate. It's probably not achievable by particular countries,” Mr. Flaherty told Reuters in London on Monday.
Asked if this means he is less inclined to share Germany's push for some kind of multilateral regulation or supervision of hedge funds, he said: “We don't share their enthusiasm.”
“We have more comfort in North America based on our experience with hedge fund transparency. We are more used to them.”
Mr. Flaherty also said he expects the G7 to discuss the perennial issue of Chinese currency reform. Chinese officials will likely be present at some of those discussions, as they have been at G7 meetings over the last few years.
“Our point with our Chinese friends has been that they ought to go farther, faster. Their point is that they're moving at their own pace which is suitable for their economy and their plan. So I do not think there is a difference in goal. I think there is a difference in pace,” Mr. Flaherty said.
China has allowed its currency, the yuan, to strengthen slightly since July, 2005.
But its global trade surplus and foreign currency reserves continue to balloon, as does the U.S. trade deficit with China. Critics say these “imbalances” are a direct result of Beijing not allowing the yuan to trade more freely on international markets.
“There has been some progress, some increased flexibility by the Chinese government. Given that, it makes sense there will be more persistence in seeking more flexibility, and gradually there will be more flexibility . . . but one must not expect this to happen quickly,” Mr. Flaherty said.
Mr. Flaherty refused to be drawn on Washington's decision last week to impose import tariffs on some Chinese paper products, or whether global financial markets are under-pricing risk.
But he did say that the main threats to the world economy are the correction in the U.S. housing market and sharp swings in commodity prices.
“In the U.S. housing market, what we've seen is moderate change, manageable change. It's not been precipitous, except arguably in some regions of the United States it's been more dramatic than others,” Mr. Flaherty said.
“On commodities prices . . . what we like to avoid is suddenness, abruptness,” he added.
Crude oil prices shot up to six-month highs above $68 a barrel last week amid rising tensions in the Gulf between the West and Iran.
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