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 While the health of the world's second-largest economy, which
hosts the G20 presidency this year, is a key talking point around
the two-day summit, the threat of the UK leaving the European Union
and its political and economic implications have also surfaced as
concerns among participants in the meeting.
Finance ministers and central bankers have called for better policy
coordination to counter a sputtering global economy and volatile
financial markets, but disagreed about what steps to take, making it
unlikely that concrete action points will emerge from the meeting.
"Talking about further stimulus just distracts from the real tasks
at hand," Germany's Minister of Finance Wolfgang Schaeuble said on
Friday, rebuffing a recommendation from the International Monetary
Fund (IMF) that the G20 should start planning now for a coordinated
stimulus program.
"We, therefore, do not agree on a G20 fiscal stimulus package as
some argue, in case outlook risks materialize.
China's central bank governor repeated assurances the country would
not stage another devaluation of its currency, the yuan <CNY=CFXS>,
to support the economy. He also sought to manage expectations around
the speed of China's economic reform agenda.
"China will strike a balance between growth, restructuring and risk
management," People's Bank of China (PBOC) Governor Zhou Xiaochuan
said at a conference held by the Institute of International Finance
(IIF) in conjunction with the G20 meeting.
"While the reform direction is clear...the pace will vary, but the
reform will be set to continue and the direction is not changed."
Overhanging the summit are global concerns about China's ability to
manage its domestic markets, currency and commitment to wider
restructuring reforms. Concerns about its slowing economy and
confusion over its currency policy were among the factors which
sowed turmoil in global markets in January.
U.S. Treasury Secretary Jack Lew said on Friday he believed China
had the tools to accomplish its economic transition, but that it
needed to stick to its reform agenda and communicate policies,
especially those on its exchange rate, clearly
"(There's a) need to avoid competitive devaluation, that's competing
in a beggar-thy-neighbor way for sharing a pie that's either frozen
or shrinking and it doesn't lead anywhere good," he told reporters.
For his part, Zhou said China had monetary policy wiggle room, a
statement echoed on the fiscal side by the Chinese finance ministry.
EUROPEAN CONCERNS
Other G20 leaders have been quick to talk down the case for further
policy stimulus amid rising debt levels and already extremely low
interest rates.
 Bank of England Governor Mark Carney warned cutting rates below zero
carried serious risks, and blamed the recent global slump in shares
and other assets on the failure of governments to make bold
economics reforms.
Schaeuble said "the debt-financed growth model has reached its
limits (and) is even causing new problems, raising debt, causing
bubbles and excessive risk taking, zombifying the economy."
And Japan's Finance Minister Taro Aso shrugged off calls on Friday
from some quarters for Tokyo to roll out fresh fiscal stimulus.
Japan's central bank stunned investors by adopting negative interest
rates last month.
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Geopolitics is also a worry for European representatives.
Speaking in Hong Kong, French Finance Minister Michel Sapin said it
was best for the UK to remain in the European Union, and expects the
British people would make the "right decision" at a June 23
referendum to remain a bloc member.
His comments follow a Financial Times report that British finance
minister George Osborne is pushing the G20 to warn against the
dangers of a "Brexit".
LIMITED ROOM FOR MANEUVER
Policymakers are watching closely for signs that China is ready to
tackle the imbalances they see standing in the way of its economic
sustainability.
Zhou said the latest economic data shows positive signs for China's
growth in 2016 and that interest rates would play a more important
policy role in dealing with downside risks.
"The signal from interest rates will be clearer...so we are
gradually developing an interest rate corridor," he said.
"We are relying more on a median value of interest rates generated
by the central bank's open market operations."
Few in the G20, however, are underestimating China's economic
challenges.
International Monetary Fund (IMF) chief Christine Lagarde said China
faced an "overwhelming" agenda of structural reforms as its leaders
open up financial markets and move the economy away from debt-fueled
investment.
Zhou said he was not worried about China's external payment
situations despite recent falls in its foreign exchange reserves,
and that fluctuations in the reserves are normal. He added that
China's fiscal policy would be more proactive.
Beyond China, Schaeuble stressed it was necessary for global
economies to continue with financial regulation, implement
structural reforms, and to make markets less volatile.
A report published by the IMF on Wednesday called for a coordinated
stimulus program to keep the slowing global economy from stalling.
The Organisation for Economic Cooperation and Development issued a
report on Friday calling on the world's 20 biggest economies to step
up the slowing pace of reforms to boost growth amid sluggish trade
and weak investment.
(Additional reporting by Jan Strupczewski, Samuel Shen, Adam
Jourdan, Engen Tham and Nate Taplin; Writing by Jason Subler and
John Ruwitch; Editing by Sam Holmes and Kim Coghill)
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