Lew says don't ex­pect 'cri­sis re­sponse' from G-20 meet­ing

The Pak Banker - - COMPANIES/BOSS -

US Trea­sury Sec­re­tary Ja­cob J. Lew down­played ex­pec­ta­tions for an emer­gency re­sponse to global mar­ket tur­bu­lence when Group of 20 fi­nance chiefs and cen­tral bankers meet this week in China, call­ing on na­tions to do more to boost de­mand with­out pur­su­ing un­fair cur­rency poli­cies. "Don't ex­pect a cri­sis re­sponse in a non-cri­sis en­vi­ron­ment," Lew said in an in­ter­view broad­cast Wed­nes­day with David Westin of Bloomberg Tele­vi­sion.

"This is a mo­ment where you've got real economies do­ing bet­ter than mar­kets think in some cases."

Pol­icy mak­ers from the world's big­gest economies are un­likely to make the kind of de­tailed na­tional com­mit­ments to re­store growth they did to at the height of the global fi­nan­cial cri­sis, Lew said. In­stead, the group, which meets in Shang­hai Feb. 26-27, may put more "meat on the bones" of the prin­ci­ples it has ad­vo­cated in re­cent years, such as by strength­en­ing the pledge that na­tions will re­frain from com­pet­i­tive cur­rency de­val­u­a­tions, he said. While the world econ­omy isn't in a mo­ment of cri­sis, Lew said that "I don't think it's un­rea­son­able to have the ex­pec­ta­tion that com­ing out of this will be a more sta­ble un­der­stand­ing of what the fu­ture may look like."

Lew's com­ments dis­count the prospect of a co­or­di­nated agree­ment to boost lack­lus­ter global growth and re­store con­fi­dence af­ter a sell­off in world stocks to start the year. Some an­a­lysts and in­vestors have called for a mod­ern-day Plaza Ac­cord, the 1985 deal among ma­jor economies to weaken the dol­lar and sta­bi­lize cur­rency mar­kets.

The world's cloudy growth out­look and pol­icy mak­ers' po­ten­tial re­sponse will dom­i­nate the agenda in Shang­hai, ac­cord­ing to peo­ple fa­mil­iar with the talks. It's un­likely to pro­duce the kind of ac­tion that came out of the G-20 meet­ing in Lon­don in April 2009, when coun­tries col­lec­tively pledged more than $1.1 tril­lion in stim­u­lus to re­ju­ve­nate a then-hob­bled global econ­omy. Lew said the U.S. wants a more se­ri­ous com­mit­ment from other G-20 coun­tries to use mon­e­tary pol­icy, fis­cal mea­sures and struc­tural re­forms to stoke de­mand.

"You can't count on the United States pro­vid­ing all the de­mand for the world. You can't be the con­sumer of first and last re­sort," he said, adding that China can do more to stim­u­late con­sumer de­mand and Europe and Ja­pan can use fis­cal pol­icy to boost growth. He said the U.S. will be push­ing for a firmer com­mit­ment by na­tions not to try to boost their economies by de­pre­ci­at­ing their cur­ren­cies.

"If the con­ver­sa­tion were to go the other way, and you were to see some ret­i­cence to make the com­mit­ment to re­frain from com­pet­i­tive de­val­u­a­tion and not take it a lit­tle bit of a step fur­ther, that would be a cause of real con­cern," Lew said.

Much of the spot­light at this week's meet­ing will be on China, which has strug­gled to main­tain con­fi­dence in its pol­icy mak­ing since a sur­prise de­val­u­a­tion of the yuan in Au­gust. Peo­ple's Bank of China Gov­er­nor Zhou Xiaochuan broke a months-long si­lence in an in­ter­view with Caixin mag­a­zine pub­lished this month, ar­gu­ing there's no ba­sis for con­tin­ued yuan de­pre­ci­a­tion. While the chal­lenges fac­ing China's econ­omy are "re­ally quite sig­nif­i­cant," Lew said, "they're be­ing in­ter­preted in a way that is un­duly neg­a­tive."

Still, he said a lack of com­mu­ni­ca­tion about the coun­try's cur­rency pol­icy has "made it very hard for any­one to re­ally un­der­stand what they were try­ing to ac­com­plish." Lew re­it­er­ated the U.S. po­si­tion that China needs to let the yuan go both "up and down with mar­kets." "When there is pres­sure to ap­pre­ci­ate, it has to be ap­pre­ci­at­ing," he said. "When there's pres­sure to de­pre­ci­a­tion, we can't com­plain if it de­pre­ci­ates."

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