G20 defuses currency war with China

The deal falls well short of the 4 per cent limit on national trade deficits and surpluses proposed by US president Barack Obama, which was blocked by exporting countries China and Germany.

Washington and Britain have accused Beijing of keeping the value of its yuan currency artificially low to make its exports cheap, fuelling the massive trade imbalances which played a part in the 2008 crisis.

However, Mr Cameron hailed the outcome as "good for British jobs, good for British businesses and good for British exporters".

Mr Cameron acknowledged that the agreements made at Seoul were not "heroic" in the way the emergency plans drawn up at London and Pittsburgh to stave off global depression at the height of the crisis were.

But he brushed off suggestions that the G20 had become an irrelevant talking shop or that Britain had been no more than a spectator to an argument between China and the United States - the so-called G2.

Mr Obama appeared to sharpen his criticism in the wake of the agreement, insisting exchange rates "must reflect economic realities".

"Emerging economies need to allow for currencies that are market-driven," he said.

• First ladies of the summit enjoy a turn in the limelight

"This is something that I raised with President Hu (Jintao] of China and we will closely watch the appreciation of China's currency."

The Seoul summit made progress on its three key challenges: endorsing plans to reduce national deficits, boosting trade and putting in place arrangements to address global imbalances, he said.

The problem of trade imbalances, which has seen countries such as China build up massive reserves on the back of booming export industries while the high-consuming West has become mired in debt, "was never going to be solved overnight", said Mr Cameron.

But he added: "The key thing is, it is being discussed in a proper multilateral way without resort to tit-for-tat measures and selfish policies.

"It is not just that there is an absence of war - an absence of trade war - there is, I believe, real presence of real progress."

China was gradually moving in the direction of increasing domestic consumption, which would help develop a market for the luxury goods of the West among its burgeoning middle classes, said Mr Cameron."Slowly, slowly, China is moving into a position of actually increasing domestic consumption and rebalancing its economy, and this G20 is a helpful marker in that progress," he said.

"I always said it wasn't going to be heroic, but I think it's good and steady progress."

He rejected suggestions that the US and China were at daggers drawn, saying that while there had been hard negotiations, the summit had seen "relatively good-natured conversations and a relatively good-natured agreement that does put imbalances up-front and centre".

Chancellor George Osborne compared the compromise deal to the Bretton Woods meeting which created a global economic framework for the post-Second World War world.

He said the communique produced at the end of the summit included "an explicit recognition that people need to move towards market-determined exchange rate systems".