Germany’s finance minister, Wolfgang Schauble, said fiscal stimulus has “reached its limit” and his government will not agree to more coordinated spending in the event of further deterioration in the global economy.
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Shanghai: Finance ministers and governors of central banks gathered at the G20 summit in Shanghai are continuing meetings on Saturday seeking deals to boost global economic growth, and to halt terrorist funding.
Global growth is at its lowest in two years and forecasters say the danger of recession is rising.
The rhetoric came after China’s central bank governor Zhou Xiaochuan said before the meeting that Beijing would embark on a proactive monetary policy to improve the fundamentals of the world’s second-largest economy while promising to keep a stable yuan without engaging in competitive devaluations to bolster exports.
Finance chiefs from the world’s top economies committed their governments to doing more to boost global growth amid mounting concerns over the potency of monetary policy. “If you want the real economy to grow there are no shortcuts which avoid reforms”, Schaeuble said.
“Our view is that it’s in the national security and economic security of the United Kingdom, of Europe and of the United States for the United Kingdom to stay in the EU”, US Treasury Secretary Jack Lew said after the meeting.
Zhou said China had monetary policy wiggle room, a statement echoed on the fiscal side by the Chinese finance ministry.
But it acknowledged that increasing the money supply alone would not lead to balanced growth and said fiscal policy would be used “flexibly”, while giving a nod to the importance of structural reforms.
But analysts were underwhelmed.
Japan implemented negative interest rates this month to spur growth, and Bank of Japan (BOJ) Governor Haruhiko Kuroda said he had “fully gained [their] understanding” from G-20 ministers about the BOJ’s thinking with regard to negative rates as a tool for escaping the deflation that has dogged its economy for years.
“The contradictory opinions voiced by Germany means that the consensus among the countries is still not adequate”.
China would cultivate an “open and transparent” capital market, adding that there was “no basis for continued depreciation of the RMB exchange rate”.
“Every country is trying to stimulate their own economy”, said Zhang Jun, director of the China Centre for Economic Research at Fudan University in Shanghai.
Participants also repeated previous pledges not to engage in competitive currency devaluations and promised to “consult closely” on exchange markets.
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.
Lagarde said that Premier Li Keqiang and all Chinese representatives said “loud and clear” that “there was no intention, no determination, no decision whatsoever to devalue the currency”.
As the world’s largest trader in goods China’s travails have sent tremors through the global economy and contributed to widespread stock market turmoil, but the ministers did not express any explicit concerns in the communique over their host’s situation.
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However, he said the danger level for each country was different, noting that China has a “high savings rate” of nearly 50 percent, compared to just 10 percent in many developed countries.
