Business

China seeks to assure G20 over its economy

  • 26 February 2016
  • From the section Business
China's central bank governor Zhou Xiaochuan Image copyright Reuters
Image caption Central bank governor Zhou Xiaochuan said China's reform direction was clear

China has sought to assure global finance ministers about the state of its slowing economy, as the G20 meeting gets under way in Shanghai.

Chinese finance minister Lou Jiwei said the country could tackle the pressures it is currently facing.

Separately, Bank of England governor Mark Carney said he was concerned by moves by some central banks to use negative rates to try to boost growth.

The G20 includes finance ministers from the world's biggest economies.

Based on gross domestic product, the G20 covers 86% of the world's economy, accounts for two-thirds of the world's population and 75% of global trade.

Striking a balance

China's economy, the second-biggest in the world, is growing at the slowest rate in 25 years as it attempts to move from an export-led nation to one led by consumption and services.

The slowdown in China's economy has created considerable uncertainty in financial markets and has led to sharp falls in commodity prices.

The head of the People's Bank of China, Zhou Xiaochuan, said China's reform direction was clear and unchanged but that the country's pace of reform would vary.

"China will strike a balance between growth, restructuring and risk management," Mr Zhou said.

"While the reform direction is clear... the pace will vary, but the reform will be set to continue and the direction is not changed."

However, the head of the International Monetary Fund, Christine Lagarde, said China faced an "overwhelming" agenda of structural reforms.

Image copyright Reuters
Image caption Mark Carney said the lack of structural reform had affected global growth

Analysts said most of Mr Zhou's comments were designed to ease global worries over the way Beijing handles its currency as well as the continuing worries about the volatility of China's stock market.

There are concerns China will allow the yuan to weaken to boost its exports and drive its economy.

Regarding the the G20's discussions on global exchange rates, Mr Zhou said he would need to wait to see how the group would discuss it.

"China has always opposed competitive currency devaluations as a way to boost export competitiveness," he said.

'Beggar-thy-neighbour'

Also speaking in Shanghai on Friday, the Bank of England's governor Mark Carney said he was concerned by moves by some central banks to cut interest rates to below zero in order to boost growth.

He said it could see the development of a "beggar-thy-neighbour" landscape - whereby attempts to boost a country's economy hurts other economies.

Mr Carney said about a quarter of global output was coming from economies where interest rates were "literally through the floor".

"It is critical that stimulus measures are structured to boost domestic demand, particularly from sectors of the economy with healthy balance sheets," he said.

"There are limits to the extent to which negative rates can achieve this."

He also said that governments needed to step up the pace of economic reforms.

"Global growth has disappointed because the innovation and ambition of global monetary policy has not been matched by structural measures,'' Mr Carney said.

"In most advanced economies, difficult structural reforms have been deferred."

Figures released on Thursday confirmed that the UK economy grew by 2.2% last year. That was the slowest annual pace since 2012, although the UK remains one of the fastest growing developed economies.

Earlier this week, the IMF said the global economy had weakened further and that it was now "highly vulnerable to adverse shocks".

It said the weakening had come "amid increasing financial turbulence and falling asset prices" and that China's slowdown was adding to global economic growth concerns.

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