G20 meets as China, U.S. consumers and banks lift mood

By Paul Thomasch

NEW YORK (Reuters) - Top finance ministers gathered on Friday to try to fix a crippled world economy as China promised it had plenty more stimulus "ammunition" if needed and stock investors found some hope that U.S. consumer confidence and banking may be stabilizing.

Citigroup Inc (C.N) Chairman Richard Parsons said his bank can make do without more government aid and would remain in private hands, adding to optimistic comments from the leaders of Bank of America Corp (BAC.N) and JPMorgan Chase & Co (JPM.N) this week.

U.S. President Barack Obama, meanwhile, said he spent every day working to get credit flowing more smoothly in financial markets while his top economic recovery adviser cautioned that rescuing the U.S. banking sector, recipient of huge government bailouts, was not the sole key to a turnaround.

"There are big economic problems behind the financial system, too, that are going to take longer to work out and you can't neglect those problems while we're working on this immediate, continuing crisis in the financial system," Paul Volcker said.

Chinese Premier Wen Jiabao said Beijing expected to see results from Obama's recovery plan but expressed concern that massive U.S. deficit spending and near-zero interest rates would erode the value of China's huge U.S. bond holdings.

He also said he was ready to pump more money into China's economy. China has already rolled out a 4 trillion yuan ($585 billion) plan to expand and speed up government spending.

"We have prepared enough ammunition and we can launch new economic stimulus policies at any time," Wen told a news conference to mark the end of the annual session of parliament.

In southern England, G20 finance ministers are meeting under growing pressure to resolve their differences over how to fix the global economy and show progress on the road to a broader summit of world leaders in London on April 2.

Speaking in London before the meeting, World Bank head Robert Zoellick warned against "doing too little, too late" and told reporters that this "is shaping up to be a very dangerous year."

Washington and Britain are urging the big industrialized countries to spend 2 percent of gross domestic product to boost demand and pull the global economy out of its tailspin, but France and Germany have rejected the U.S. and British calls.

French criticism of U.S. shortcomings on market regulation has served to deepen the rift.

Japan, whose finance minister urged world leaders to focus on giving the global economy an immediate boost, pledged to outline a new stimulus package in time for the full Group of 20 summit next month and said it would inject public money into three struggling banks.

U.S. CONSUMER CONFIDENCE BRIGHTENS

Stocks edged higher on most major exchanges -- ending one of the best weeks in 20 years as measured by MSCI's all-country stock index .MIWD00000PUS -- but oil prices fell on lower demand forecasts as the Organization of Petroleum Exporting Countries prepared to meet in Vienna over the weekend.

U.S. stocks overall had their best week since late November and the broad S&P 500 had its third-best week since World War Two. The S&P added 10.7 percent, the Nasdaq 10.6 percent and the Dow Jones industrial average 9 percent for the week.