G-7 to Look at Power of Hedge Funds

ESSEN, Germany, Feb. 10 -- The Group of Seven called for more vigilance on the rising power of hedge funds but favored a conciliatory approach toward the industry.

The G-7 ministers said the group would talk with fund operators and the private sector and ask the Financial Stability Forum, a gathering of financial ministers, regulators, institutions and others, to reassess the impact of the funds on global markets.

German Finance Minister Peer Steinbrueck has said the country wants G-7 nations and European Union countries to try to preempt any risks that speculative hedge funds may pose to the global financial system.

The high-risk, largely unregulated and secretive investment pools have traditionally been the investment domain of the wealthy but have become popular with pension funds, life insurance companies and small investors looking for high returns.

Also, China came under renewed pressure on its yuan Saturday from the finance ministers and central bankers from the world's wealthiest nations. But Japan emerged from the meeting without a public scolding. It had faced complaints before the meeting from the euro zone that its weakening yen was giving the country an unfair competitive edge, making Japanese goods cheaper than those in the E.U.

China's tight control of its currency and huge trade surpluses have raised concerns in the West. The G-7 praised China's commitment to "rebalance growth," but called on the country to let the yuan have greater flexibility in responding to market movements.

Looking at energy concerns, the G-7 members said that global inflationary pressures have lessened, in part because of lower prices, but said they would continue to keep an eye on consumer prices.

They also said that finding, and using, more energy-efficient methods, along with diversifying sources, had become an increasing concern.

The G-7 members were hopeful that the Doha round of free-trade talks would resume.

"We remain committed to resisting protectionist sentiment and fully support the relaunch of the Doha trade negotiations," they said in the statement.

The G-7 consists of Britain, Canada, France, Germany, Italy, Japan and the United States.