China tries to allay fears of global finance leaders at G20 meet

G20 FM

Reassuring investors about the potential of its economy, China is trying to restore investors’ confidence in its economy. The G20 Finance Ministers and Central Bank heads meeting in Shanghai has called for better policy coordination to counter a sluggish global economy. While China’s economy was one of the focal point of discussions, UK’s future in the EU was also a major issue being discussed by the G20.

China’s economy has taken a hit in recent months with its growth rate falling below 7 percent for the first time in 25 years. The new normal growth, as many analysts have defined, has not dented the confidence of China, which believes its economy will do well in the days ahead. The US Treasury Secretary Jack Lew has said that China has the tools to accomplish its economic transition and needs to stick to its reform agenda. He said  that it needs to 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,” Mr Lew added.

China faces the need for structural reforms as its leaders open up financial markets. The Chinese government is working towards moving the economy away from debt-fueled investment, according to IMF Managing Director Christine Lagarde

Stimulus debate

Global economies have expressed concern on a possible stimulus package in China saying that due to rising debt levels and already extremely low interest rates, it is not advisable to go for a stimulus and the debt-financed model has reached its limits. Japan’s Finance Minister Taro Aso has played down the need for Tokyo to get a fresh new fiscal stimulus to revive a sluggish Japanese economy.

 

Geopolitical scenario

The EU has been pre-occupied with the refugee crisis on one hand and the threats of a potential exit by Britain from the regional bloc. The EU has given a special status for UK recently to make it stay in the bloc. France’s Finance Minister Michel Sapin said that it was best for the UK to remain in the European Union.  He also said that he expects Britain to make the “right decision” in June 23 referendum to continue with the EU. A breakaway from the EU would not only have an impact on Britain but would also impact the EU as a whole.

 

 

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