G20 finance ministers agree currency ‘peace’
GLOBAL finance chiefs agreed to avoid getting drawn into currency battles after China set out plans to steer its economy on to a slower path of expansion.
Finance ministers and central bankers from the Group of 20 nations pledged over the weekend to “refrain from competitive devaluations” after a two-day meeting in Turkey.
That pact was sealed after China’s central bank governor, Zhou Xiaochuan, explained how his country plans to tame stock market volatility that roiled emerging economies last month just as the US prepares to raise interest rates.
With the MSCI emerging market index down 18 per cent this year, the final communiqué cited “recent volatility in financial markets” and the need to monitor potential spillovers.
Chinese Finance Minister Lou Jiwei told the meeting he expects China’s economy to grow at about 7 per cent pace for the next four or five years.
China’s surprise decision to revalue the yuan as it tried to contain the stockmarket turmoil caused the currency to drop the most in 21 years last month, triggering exchangerate declines elsewhere on concern that a weaker yuan will hurt countries exporting to China.
Mr Zhou said his country had had to deal with the bursting of a stockmarket bubble as he described policymakers’ plans.
He said he saw no reason for the yuan to decline further in the long run.
China’s slowdown comes as the US Federal Reserve eyes raising US interest rates for the first time in nine years.