Canadian Finance Minister Jim Flaherty said China is backing Canada in its fight against a US-European proposal to create an international tax on banks, the Toronto-based Globe and Mail reported. The idea of a bank levy, supported by the International Monetary Fund as a way to ensure taxpayers are not forced to bail out failing banks as they were during the financial crisis, is a contentious one that is to be discussed at the upcoming G20 meeting in Toronto. Flaherty is in China on an Asian tour lobbying against the idea. He has met with Finance Minister Xie Xuren and will meet with People’s Bank of China governor Zhou Xiaochuan today. He has also lobbied India, Brazil, Argentina and Mexico. Support for the levy is highest in countries that were forced to undertake expensive bailouts of their financial sectors, but is unpopular in countries – like China – which believe that their banking systems successfully weathered the storm. Canada prefers an alternative scheme that includes a kind of self-insuring bond issued by banks, called "embedded contingent capital," and better regulation. However, Beijing has yet to make a public statement of support or opposition to the idea, and some commentators question Flaherty’s confidence in Chinese support.
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