G20 to focus on growth, China risks

Policymakers to discuss ways to make financial system more stable

It’s ‘very important’ for the US, China, Europe and Japan to take coordinated action as needed

Haruhiko Kuroda,

Bank of Japan’s Governor

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 currencymarket 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 on Friday. “I don’t know if we have the conditions to make it possible.”

Videgaray said he wants to go beyond the G20’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 on Friday at a Press briefing on her reappointment as head of the fund. The G20 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 US, Germany, China and Japan, will meet in Shanghai on February 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 US, China, Europe and Japan to take coordinated action as needed. —