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 A communique from the Group of 20 (G20) finance ministers and
central bankers flagged a series of risks to world growth, including
volatile capital flows, a sharp fall in commodity prices and the
potential "shock" of a British exit from the EU.
"The global recovery continues, but it remains uneven and falls
short of our ambition for strong, sustainable and balanced growth,"
said the communique, issued at the end of a two-day meeting in
Shanghai.
"Monetary policies will continue to support economic activity and
ensure price stability ... but monetary policy alone cannot lead to
balanced growth."
Faltering growth and market turbulence have exacerbated policy
frictions between major economies in recent months, and the
statement also noted concerns over escalating geopolitical tensions
and Europe's refugee crisis.
The reference to "Brexit" had not been included in earlier versions
of the text, according a senior official who had seen various
drafts, but was added after British officials pressed for it.
Britons will vote in June 23 referendum on whether to remain in the
European Union.
"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 European Union," U.S. Treasury
Secretary Jack Lew said after the meeting.
VOLATILITY VS FUNDAMENTALS
The G20 ministers agreed to use "all policy tools – monetary, fiscal
and structural – individually and collectively" to reach the group's
economic goals.
Christine Lagarde, managing director of the International Monetary
Fund, said she sensed renewed urgency among the group's members for
collective action, warning that without it there was a risk that the
recovery could derail.
But there was no plan for specific coordinated stimulus spending to
spark activity, as some investors had been hoping after markets
nosedived at the start of 2016. Over the course of the two-day
meeting in Shanghai comments by policymakers made clear the
divergence of views on the way forward.
Finance chiefs had agreed that "the magnitude of recent market
volatility has not reflected the underlying fundamentals of the
global economy", the communique draft said.
To pep up the global economy, faster progress on structural reforms
"should bolster potential growth in the medium term and make our
economies more innovative, flexible and resilient", it said.
"We are committed to further enhancing the structural reform
agenda," it added.
Divisions have emerged among major economies over the reliance on
debt to drive growth and the use of negative interest rates by some
central banks, such as in Japan.
Germany had made it clear it was not keen on new stimulus, with
Finance Minister Wolfgang Schaeuble saying on Friday the
debt-financed growth model had reached its limits.
"It is even causing new problems, raising debt, causing bubbles and
excessive risk taking, zombifying the economy," he said.
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The G20, which spans major industrialized economies such as the
United States and Japan to the emerging giants of China and Brazil
and smaller economies such as Indonesia and Turkey, reiterated in
the communique a commitment to refrain from targeting exchange rates
for competitive purposes, including through devaluations.
They pledged to "consult closely" on foreign exchange markets.
CURRENCY CONCERNS
Jeroen Dijsselbloem, chairman of euro zone finance ministers, said
G20 members had agreed to inform each other in advance about policy
decisions that could lead to devaluations of their currencies.
G20 host China used the meeting to try to allay concerns about the
world's second-biggest economy, and Beijing's ability to manage it,
that have grown since a market rout and a surprise devaluation last
August.
"Monetary policy will probably have to be kept appropriately loose,
even though people have realized that its role cannot replace fiscal
policy," said China's Finance Minister Lou Jiwei.
Chinese policymakers reiterated pledges not to devalue the yuan
<CNY=CFXS> again, and Premier Li Keqiang told the G20 opening
session on Friday there was no basis for continued depreciation of
the yuan.
But there appeared to be concerns that some members may seek a quick
fix to domestic woes through a weaker currency.
Japan implemented negative interest rates this month to spur growth,
and Bank of Japan governor Haruhiko Kuroda said he had "fully gained
(their) understanding" from G20 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.
Japanese Finance Minister Taro Aso said he had urged China to carry
out currency reform and map out a mid-term structural reform plan
with a time frame.
"Chinese authorities need to present a mid-term structural reform
plan with concrete schedule and a package of measures to stabilize
yuan, based on recognition that communication between Chinese
authorities and markets has caused market volatility and capital
outflows," he told reporters.
(Reporting by Gernot Heller, Jan Strupczewski, Adam Jourdan, Brenda
Goh and Kevin Yao in Shanghai, and Tetsushi Kajimoto and William
Mallard in Tokyo; Writing by John Ruwitch and Pete Sweeney; Editing
by Alex Richardson)
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