Organization for Economic Co-operation and Development (OECD) chief economist Catherine Mann answers audience questions during a session of the G20 High-level Seminar on Structural Reform, on the sidelines of the G20 Finance Ministers and Central Bank Governors Meeting at the Pudong Shangri-la Hotel in Shanghai, China, Friday, Feb. 26, 2016. Instead, the communist government is scrambling to defend its reputation for economic competence following stock market and currency turmoil.
There are widespread concerns Beijing could lower the value of its yuan in order to lift its struggling export sector, though Chinese officials deny any such plans. That has driven an outflow of capital from China that spiked to a record $135 billion in December.
Finance leaders from the world’s 20 major economies on Saturday will call for using every possible measure to improve market stability and prop up sagging growth, according to a draft of the statement to be issued upon conclusion of their two-day meeting.
The world “risks being trapped in a low growth, low inflation and low interest rate equilibrium”, he said.
In January, the fund predicted growth of 3.4 percent for the world economy this year but may downgrade the figure when it publishes its next forecast in April. It said another downgrade is likely in April.
Overhanging the summit are global concerns about China’s ability to manage its domestic markets and currency and wider restructuring reforms, sources of great anxiety for investors in recent months.
The shift of official tone, which had been characterized as “prudent” for the past few years, brings language on the policy stance into line with reality, Bloomberg economist Tom Orlik wrote in a research note.
The Shanghai Composite Index climbed 0.5 per cent to 2753.71 at 1.04pm, after plunging 6.4 per cent on Thursday.
“Our focus should rather remain on structural reforms”.
The pound has recovered some ground since hitting 7-year lows against the dollar on Wednesday and is now down 2.7 percent on the week, its worst performance since 2010. He noted that it still was among the world’s strongest performances.
Shanghai rose nearly one percent after the head of the People s Bank of China said the economy was strong and signalled authorities could do more to help stimulate growth. “While the reform direction is clear… the pace will vary, but the reform will be set to continue and the direction has not changed”.
China’s economic slowdown has sharply pulled down oil and other commodity prices, with investors showing risk aversion in the preference of their assets and pulling money out of emerging countries.
Germany’s finance minister, Wolfgang Schauble, said his government would not agree to a coordinated fiscal stimulus package in the event of further deterioration in the global economy.
Referring to monetary and fiscal policy and structural reforms, Lagarde said, “There has to be action on all fronts”.
But gains were limited as oil prices fell back and G20 financial leaders meeting in Shanghai offered mixed messages over the potential for new stimulus to stave off the risk of recession.
Speaking at the same conference, Bank of England governor Mark Carney retorted: “Several commentators are peddling the myth that monetary policy is out of ammunition”.
“Monetary policy is extremely accommodating to the point that it may even be counterproductive in terms of negative side effects”, Schaeuble said.