* US to feel pressure over fiscal cliff at IMF/G7 meetings
* China, U.S. data mildly positive; IMF to cut growth
* Talks to revolve around fiscal stimulus, risk reduction
By Vidya Ranganathan
SINGAPORE, Oct 7 When finance officials from the
world's leading economies meet this week, it is against the
backdrop of a global economy that shows a glint of stability,
with a deluge of Chinese data due in the coming days at best
expected to confirm that.
Although investors realise this meeting of top economic
chiefs -- the Group of Seven finance ministers, International
Monetary Fund and World Bank -- in Tokyo cannot possibly produce
quick fixes for euro zone's debt crisis or the approaching U.S.
fiscal contraction, or even extract stimulus pledges from China,
the pressure on governments to do more is intense.
Deputy finance ministers and central bankers from the
leading economies have already warned that the raft of
conventional and unconventional policy actions by monetary
authorities can only buy the world economy some time, and that
it is up to governments to boost demand and create jobs.
Fortunately for them, the economic data in the run up to the
week-long meetings has been slightly encouraging.
Besides a headline-grabbing drop in the September U.S.
jobless rate to its lowest in nearly 4 years, at 7.8 percent,
there was enough evidence in manufacturing surveys in China and
the United States to suggest the world's two biggest economies
might have passed a bottom in the third quarter, even if the
promise of improvement was missing.
This week's data on loan growth at Chinese banks should
offer a glimpse into whether Beijing's gentle easing and go-slow
encouragement of infrastructure investments are working.
It is also the week that the euro zone's permanent
500-billion-euro bailout fund, the European Stability Mechanism
(ESM), is launched.
But the spotlight is on the IMF/World Bank annual autumn
meetings in Tokyo, where both the United States and Europe may
be put on the defensive.
Euro zone officials will explain what they have done so far
to deal with their problems, according to a paper they have
prepared for a meeting with their G7 colleagues from Canada,
Japan and the United States. They will also point a finger at
Washington as a potential source of economic stress.
"In particular, the U.S. needs to agree by the end of the
year on how to deal with the 'fiscal cliff' and, at the same
time, adopt a credible fiscal consolidation plan," the document
The unease over both the impending huge package of U.S.
spending cuts and tax increases that take effect in January and
the presidential election in November, has been growing, almost
eclipsing the confidence inspired by the Federal Reserve's new
open-ended debt purchase plans.
But the bickering between European leaders and the IMF over
a Greece bailout, mainly over the IMF insistence that European
governments restructure the Greek debt they hold, is by no means
going to be a side-show at the IMF's 2012 annual meeting.
Japan, meanwhile, is bringing the issue of its rising
currency, and the pressure the high yen puts on an economy
that's on the verge of recession, to the G7 dinner table.
The challenges to a broad-based global recovery will remain
the overriding theme at the G7 meeting, and the week brings the
release of some sombre forecasts by the IMF.
A German newspaper reported the IMF will cut its forecasts
for global economic growth to 3.3 percent this year and 3.6
percent in 2013 from earlier forecasts of 3.4 percent and 3.9
According to the paper, the IMF is also expected to warn of
a significant increase in downside risks and say the growth
outlook depended on "whether decisive political steps to
stabilise confidence are taken in the euro zone and U.S.".
The World Bank has done its bit to highlight how vulnerable
economies in Asia are. It said growth in east Asia and the
Pacific will slow by a full percentage point in 2012 to 7.2
percent, but domestic demand will help a rebound next year.
The message was similarly and consistently bearish in the
Australian central bank's statement after a surprise interest
rate cut last week, as they could be in data this week.
Singapore, a bellwether of Asian openness to global demand,
may have slipped into a technical recession in the third
quarter, and euro zone industrial production data will be
further confirmation of a protracted contraction in that region.
"It shouldn't be an exciting quarter," said Bank of
Singapore chief economist Richard Jerram. "There is no reason to
be expecting the data to deteriorate. At the same time, there
might be some degree of improvement in the data, but nothing
SPOTLIGHT ON CHINA MONETARY DATA
The bulk of data on China's third-quarter growth, and
September data on trade and industrial production isn't due for
another week, and shouldn't be much of a surprise either.
China's economy expanded 7.6 percent from a year earlier in
the second quarter, the slowest pace in three years. The third
quarter was possibly worse, at 7.4 percent, as per a Reuters
But this week's data on money supply and bank loans is in
many ways of greater consequence for China watchers keen to see
if the central bank's open market operations and the
government's bringing forward of infrastructure projects show up
in loan growth.
Investors have been persistently disappointed by the absence
of stimulus this year from a government with rather large
pockets and ahead of the Communist Party's once-in-a-decade
Yet they know China is keen to avoid a repeat of the credit
binge that followed the 2008 markets' crash, whose after-effects
have left the economy overly reliant on investment and saddled
its banks with bad loans.
Economists polled by Reuters estimate China's banks issued
650 billion yuan of new loans in September. Other data showed
the issuance of medium and longer term bonds slowed last month.
"Overall, there are no clear signs that credit supply has
picked up strongly in September, which is necessary to
jump-start the investments and growth," said Citibank strategist
He Weisheng. "This means growth will remain weak in Q4."