G-20 talks said to cen­ter on global growth

The Pak Banker - - BUSINESS -

The weak­en­ing global-growth out­look and how pol­icy mak­ers should re­spond will dom­i­nate the agenda when of­fi­cials from the world's big­gest economies gather in Shang­hai next week, peo­ple fa­mil­iar with the talks said.

The Group of 20 cen­tral bankers and fi­nance min­is­ters will also dis­cuss the tur­moil in China's fi­nan­cial mar­kets and ways to bol­ster a safety net for the global fi­nan­cial sys­tem, ac­cord­ing to the of­fi­cials, who asked not to be named be­cause de­tails of the meet­ing's agenda haven't been pub­licly an­nounced.

China, whose host­ing of the fo­rum this year cul­mi­nates in a lead­ers' sum­mit in Septem­ber, is push­ing a de­tailed and di­verse plat­form that cov­ers ev­ery­thing from bol­ster­ing in­vest­ment in in­fra­struc­ture to cli­mate-friendly fi­nanc­ing, the peo­ple said. The dis­cus­sions will in­clude ex­plor­ing ways to make the global fi­nan­cial sys­tem more sta­ble, up­dat­ing In­ter­na­tional Mon­e­tary Fund gov­er­nance and coun­ter­ing ter­ror­ist fi­nanc­ing.

Any type of a sweep­ing global agree­ment to com­bat cur­rency-mar­ket volatil­ity is un­likely, even as some an­a­lysts and in­vestors say there's a po­ten­tial need for a mod­ern-day Plaza Ac­cord, the 1985 deal among ma­jor economies to weaken the dol­lar. A broader agree­ment is de­sir­able to­day, though it would be "quite com­plex to achieve" com­pared with the Plaza Ac­cord, Mex­i­can Fi­nance Min­is­ter Luis Vide­garay said in an in­ter­view Fri­day. "I don't know if we have the con­di­tions to make it pos­si­ble."

Vide­garay said he wants to go be­yond the G-20's re­cent mes­sage of re­frain­ing from com­pet­i­tive de­val­u­a­tions to achiev­ing more trans­parency into cen­tral bank in­ter­ven­tion in cur­rency mar­kets. "Are we in a 2009 mo­ment? I don't think so. Are we in a mo­ment where co­or­di­na­tion is needed? Yes," IMF Man­ag­ing Di­rec­tor Chris­tine La­garde said Fri­day at a press briefing on her reap­point­ment as head of the fund. The G-20 needs to fo­cus on pol­icy spillovers, and the "asyn­chronic­ity" of ac­tions such as those by the Fed­eral Re­serve, Bank of Ja­pan and Euro­pean Cen­tral Bank need to be bet­ter re­viewed and an­tic­i­pated, she said.

China's eco­nomic out­look will fea­ture promi­nently. Tur­moil in the na­tion's stock mar­kets and weak­ness in its cur­rency in Jan­uary roiled in­vestors around the world, prompt­ing of­fi­cials in­clud­ing La­garde to call for bet­ter com­mu­ni­ca­tion from the na­tion's Com­mu­nist pol­icy mak­ers. The eco­nomic lead­ers from the Group of 20, which in­clude the U.S., Ger­many, China and Ja­pan, will meet in Shang­hai on Feb. 26 and 27.

Bank of Ja­pan Gov­er­nor Haruhiko Kuroda has called for a global re­sponse on the dim­mer out­look, say­ing it's "very im­por­tant" for the U.S., China, Europe and Ja­pan to take co­or­di­nated ac­tion as needed. "I don't know how it will turn out specif­i­cally un­til we hold the meet­ing, but I think it's de­sir­able for the G-20 meet­ing to be some­thing that con­trib­utes to sta­bi­lize global fi­nan­cial mar­kets," Kuroda told law­mak­ers in Tokyo this week.

For their part, Chi­nese of­fi­cials have pinned the cause of global volatil­ity on the Fed­eral Re­serve's de­ci­sion to raise in­ter­est rates in De­cem­ber for the first time in al­most a decade. Au­thor­i­ties in Bei­jing are also ex­pected to out­line that the yuan's volatil­ity is part of its path to full con­vert­ibil­ity. Lead­ing up to the G-20 con­clave, Peo­ple's Bank of China Gov­er­nor Zhou Xiaochuan broke his months-long si­lence with an in­ter­view with Caixin mag­a­zine pub­lished Feb. 13, ar­gu­ing there's no ba­sis for con­tin­ued yuan de­pre­ci­a­tion and that the cen­tral bank can't "re­veal its op­er­a­tional strate­gies" to spec­u­la­tors.

La­garde said Fri­day that the Zhou com­ments were a "good ex­am­ple of how com­mu­ni­ca­tion can ac­tu­ally clear the un­cer­tain­ties and the trep­i­da­tions." The Shang­hai meet­ing comes amid a dark­en­ing out­look for the world econ­omy, with stock mar­kets be­set by wor­ries over China's slow­down and a sharp fall in oil prices.

The Or­ga­ni­za­tion for Eco­nomic Co­op­er­a­tion and De­vel­op­ment be­came the lat­est body to cut its global growth fore­casts, say­ing that the economies of Brazil, Ger­many and the U.S. are slow­ing, and warn­ing that some emerg­ing mar­kets are at risk of ex­change-rate volatil­ity. The Paris-based group said Thurs­day that more fis­cal stim­u­lus may be needed to sup­port mon­e­tary ef­forts al­ready un­der way. "A stronger col­lec­tive pol­icy re­sponse is needed to strengthen de­mand," the OECD said.

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