Monetary tools, fiscal policies and structural reforms should be mobilised to support the world economy, G20 central bankers and finance ministers said after their meeting in Shanghai yesterday.
The two-day gathering
Without mention of explicit concerns about China’s policymaking and reform agenda, the communique published after the meeting said the magnitude of recent market volatility had not reflected the underlying fundamentals of the global economy.
The rhetoric came after China’s central bank governor Zhou Xiaochuan said before the meeting that Beijing would embark on a proactive monetary policy to improve the fundamentals of the world’s second-largest economy while promising to keep a stable yuan without engaging in competitive devaluations to bolster exports.
A stock market rout on the mainland and a surprising one-off devaluation of the yuan last year resulted in turbulence on the global markets with jittery investors complaining about Beijing’s opaque policymaking.
There had been mounting worries about a currency war as nations rushed to devalue their own currencies to make exports cheaper.
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Beijing reiterated it would not join competitive devaluations, with the central bank governor saying its policies aimed to ensure a smooth transition to growth driven by consumption rather than exports and investments.
“The language on the exchange rates is very important,” US Treasury Secretary Jacob Lew told reporters after the communique was released. “We will keep each other informed and avoid surprising each other.”
Beijing admitted its policies had a spillover effect that could lead to currency volatility and cross-border capital flows.
But Zhou, despite saying China welcomed communication and coordination, insisted Beijing would take a firm stance on its reforms, which would likely introduce new policy incentives including interest rate cuts.
“The key policymakers appeared to have agreed to continue to ease monetary policies to buoy global growth on the G20 meeting,” said Luo Wenbo, an economist at Zhongtai Securities. “The meeting served as a good opportunity for building consensus though it still lacked substantial action plans.”
The G20 nations said renewed efforts would be made to achieve the goal of 2 per cent additional growth by 2018.
The communiqué added Britain’s prossible exit from the European Union, and the escalating refugee crisis in Syria to its long list of concerns, even as it argued recent market volatility didn’t reflect global growth momentum.
China’s finance minister Lou Jiwei said a proactive monetary policy was needed now for the world’s second-largest economy to implement the structural reforms but Beijing would also strike a balance between the short-term effect and long-term benefits in policymaking.