G-20 nations prioritize growth, currency policy
SHANGHAI — Finance officials of the world’s biggest economies promised Saturday to use “all tools” to shore up sagging global growth and to avoid devaluing their currencies to boost exports, but they made no pledges of joint action.
Finance ministers and central bankers of the Group of 20 tried to reassure jittery financial markets that the global economy is healthy, though they acknowledged in a statement that they “need to do more” to boost growth.
The declaration after a two-day meeting promised “growth-friendly” tax and spending policies. The governments pledged to press ahead with previously promised overhauls aimed at making their economies more efficient and productive.
“We agreed to use all tools — monetary, fiscal and structural — to boost growth,” China’s finance minister, Lou Jiwei, said at a news conference.
What each country does will be dictated by its circumstances, Lou said. He said some can afford stimulus, but some with large debts have to move faster on structural economic overhauls.
Companies and investors were looking to the Shanghai meeting for reassurance and action. But leaders from the United States, China, Europe and elsewhere had tried to squelch expectations that it would produce specific growth plans.
Global growth is at its lowest in two years, and forecasters have said the danger of recession is rising. The International Monetary Fund cut this year’s global growth forecast by 0.2 percentage points last month to 3.4 percent. It said another downgrade is likely in April.
The G-20 statement acknowledged that “vulnerabilities have risen” in the global economy against a backdrop that includes volatile capital flows, the European refugee crisis and the possibility of a British exit from the European Union. But it said that growth should continue at a “moderate pace” in advanced economies and “remains strong” in developing countries.
The governments promised to avoid “competitive devaluations” of their currencies to boost exports — a key concern of global markets after turmoil over China’s yuan.
A surprise change in August in the mechanism Beijing uses to set its exchange rate prompted fears that the yuan might be weakened to support struggling Chinese exporters. Despite officials’ denials, repeated Friday by Chinese central bank Gov. Zhou Xiaochuan, those expectations have driven an outflow of capital that spiked to a record $135 billion in December.
The Chinese hosts had wanted the meeting to promote their campaign for a bigger voice in managing trade and finance. Instead, the communist government had to defend itself after stock market and currency turmoil.
A theme from officials was that governments need to speed up economic overhauls because multiple rounds of stimulus, used by central banks and treasuries since the 2008 global crisis, are no longer effective.
A previous G-20 meeting in Australia produced a list of about 800 promised overhauls aimed at simplifying regulation and boosting trade, technology and job creation, but many have yet to be carried out.
On Friday, Germany’s finance minister, Wolfgang Schaeuble, said his government would refuse to take part in any new joint stimulus in the event of falling global growth.
He insisted that governments had to embrace overhauls instead.
Others at the meeting included U.S. Federal Reserve Chairman Janet Yellen, Mario Draghi of the European Central Bank, and their counterparts from Europe, South Korea, India and South Africa.
U.S. Treasury Secretary Jacob Lew welcomed the agreement to avoid devaluations and urged governments to push ahead with overhauls.
“We need to redouble our efforts to boost global demand, rather than relying on the United States as the consumer of last resort,” Lew said.
British Treasury chief George Osborne said the statement’s acknowledgment of unease over his country’s possible departure from the EU emphasized its potential consequences.
The pound has hit seven-year lows as investors react to uncertainty about the June 23 referendum on whether to remain in the 28-country bloc.
The Shanghai meeting concluded that a possible vote to withdraw “is among the biggest economic dangers this year,” Osborne said. “If that’s their assessment of the impact on the world economy, imagine what it would do to the U.K.”