G-7: World economy sound, but China must move on yuan

By Gernot Heller and Mark Felsenthal, Reuters

WASHINGTON — The world economy is sound, although financial markets may remain ragged for some time, and China must let its currency rise faster to rebalance global growth, finance officials from rich nations said Friday. Markets have improved since August, when a credit crisis sparked by foreclosures in the U.S. subprime mortgage market spread worldwide, but lingering strains, high oil prices and the housing market mess will likely drag on growth, Group of Seven officials said in a communique after a meeting here. “We confront these current challenges against the backdrop of a strong economy — not just in the U.S., but globally,” U.S. Treasury Secretary Henry Paulson said after the meeting.

French Finance Minister Christine Lagarde said she was reassured about the state of the U.S. economy after hearing from Paulson and U.S. Federal Reserve Chairman Ben Bernanke.

The G-7 finance ministers and central bankers were eager to calm volatile markets, but even as they met, stock prices tumbled around the globe.