G-20 Talks Said to Center on Global Growth, China Turbulence

  • China's agenda also includes infrastructure, IMF governance
  • BOJ's Kuroda has called for group to help stabilize markets

The weakening global-growth outlook and how policy makers should respond will dominate the agenda when officials from the world’s biggest economies gather in Shanghai next week, people familiar with the talks said.

The Group of 20 central bankers and finance ministers will also discuss the turmoil in China’s financial markets and ways to bolster a safety net for the global financial system, according to the officials, who asked not to be named because details of the meeting’s agenda haven’t been publicly announced.

China, whose hosting of the forum this year culminates in a leaders’ summit in September, is pushing a detailed and diverse platform that covers everything from bolstering investment in infrastructure to climate-friendly financing, the people said. The discussions will include exploring ways to make the global financial system more stable, updating International Monetary Fund governance and countering terrorist financing.

Any type of a sweeping global agreement to combat currency-market volatility is unlikely, even as some analysts and investors say there’s a potential need for a modern-day Plaza Accord, the 1985 deal among major economies to weaken the dollar.

Coordination Needed

A broader agreement is desirable today, though it would be “quite complex to achieve” compared with the Plaza Accord, Mexican Finance Minister Luis Videgaray said in an interview Friday. “I don’t know if we have the conditions to make it possible.”

Videgaray said he wants to go beyond the G-20’s recent message of refraining from competitive devaluations to achieving more transparency into central bank intervention in currency markets.

“Are we in a 2009 moment? I don’t think so. Are we in a moment where coordination is needed? Yes,” IMF Managing Director Christine Lagarde said Friday at a press briefing on her reappointment as head of the fund. The G-20 needs to focus on policy spillovers, and the “asynchronicity” of actions such as those by the Federal Reserve, Bank of Japan and European Central Bank need to be better reviewed and anticipated, she said.

China’s economic outlook will feature prominently. Turmoil in the nation’s stock markets and weakness in its currency in January roiled investors around the world, prompting officials including Lagarde to call for better communication from the nation’s Communist policy makers.

The economic leaders from the Group of 20, which include the U.S., Germany, China and Japan, will meet in Shanghai on Feb. 26 and 27.

Bank of Japan Governor Haruhiko Kuroda has called for a global response on the dimmer outlook, saying it’s “very important” for the U.S., China, Europe and Japan to take coordinated action as needed.

Stabilizing Markets

“I don’t know how it will turn out specifically until we hold the meeting, but I think it’s desirable for the G-20 meeting to be something that contributes to stabilize global financial markets,” Kuroda told lawmakers in Tokyo this week.

For their part, Chinese officials have pinned the cause of global volatility on the Federal Reserve’s decision to raise interest rates in December for the first time in almost a decade.

Authorities in Beijing are also expected to outline that the yuan’s volatility is part of its path to full convertibility. Leading up to the G-20 conclave, People’s Bank of China Governor Zhou Xiaochuan broke his months-long silence with an interview with Caixin magazine published Feb. 13, arguing there’s no basis for continued yuan depreciation and that the central bank can’t “reveal its operational strategies” to speculators.

Lagarde said Friday that the Zhou comments were a “good example of how communication can actually clear the uncertainties and the trepidations.”

The Shanghai meeting comes amid a darkening outlook for the world economy, with stock markets beset by worries over China’s slowdown and a sharp fall in oil prices.

The Organization for Economic Cooperation and Development became the latest body to cut its global growth forecasts, saying that the economies of Brazil, Germany and the U.S. are slowing, and warning that some emerging markets are at risk of exchange-rate volatility. The Paris-based group said Thursday that more fiscal stimulus may be needed to support monetary efforts already under way. “A stronger collective policy response is needed to strengthen demand,” the OECD said.

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