(Adds comments from China premier and more quotes from China finmin)
SHANGHAI, Feb 26 (Reuters) - Global economic policymakers are convening in Shanghai for a G20 meeting of central bank governors and finance ministers.
Following are highlights of comments made at the G20 meeting and related events:
“Macroeconomic policy coordination needs to be strengthened. The global economic and financial situation may have become more grim and complex. It is time for countries to stand together to tide over difficulties.
“When formulating national macroeconomic policies, G20 members need to keep in mind not just their own growth, they also need to look after the spillover effects of their policies. They need to increase communication and coordination, and work together to ensure stability of international financial markets.
“Structural reforms need to be carried forward. The international financial crisis showed that quantitative easing policies could hardly remove structural obstacles to growth. They might even lead to more negative externalities. Our focus should rather remain on structural reforms. Countries face different circumstances. What is desirable is innovation, deregulation, more competition and greater openness. This way the economy will grow more vibrant...
“Though economic growth is slowing down, the employment rate is steadily growing, that means our efforts in fostering new drivers to growth and developing a new economy are paying off. We have the confidence to handle the complex situation at home and abroad.
“China will continue with market-oriented and rule-based financial reform. We will cultivate an open and transparent capital market and ensure that it enjoys long-term, steady and healthy development. We will pursue a managed floating rate regime based on market demand and supply, and with reference to a basket of currencies.
“There is no basis for continued depreciation of the RMB exchange rate. It will stay basically stable on an adaptable equilibrium level. China’s continued growth and reform and opening up provide a solid basis to support steady performance of its financial markets.”
ZHOU XIAOCHUAN, GOVERNOR OF THE PEOPLE’S BANK OF CHINA:
“While the reform direction is clear, managing the reform pace will need windows (of opportunity) and conditions. ... The pace will vary, but the reform will be set to continue and the direction is not changed.
“China will strike a balance between growth, restructuring and risk management.
“China still has some monetary policy space and tools to answer potential downside risks.
“As for monetary policy...we will not focus on external conditions or capital flows in setting our monetary policy framework. Monetary policy will pay more attention to price-based adjustments instead of quantitative adjustments, that means interest rates will play a more important role.
“At the same time, the signal from interest rates will be clearer... so we are gradually developing an interest rate corridor. We are relying more on a median value of interest rates generated by the central bank’s open market operations.”
On competitive forex devaluations:
“As for whether the G20 will specifically coordinate exchange rates, it has never done this before. Some people have raised the issue. We need to wait and see how the G20 should discuss it. China has always opposed competitive currency devaluations as a way to boost export competitiveness. China had a nearly $600 bln surplus in mercantile trade last year, so we will not participate in competitive currency depreciation to boost China’s exports. The G20 will put emphasis on global structural reforms, and on sustainable growth.”
“There is nothing to worry about the country’s external payments ability. In order to maintain an appropriate level of foreign exchange reserves, the key is that we have correct macro-policies. The exchange rate policy should be correct; if the exchange rate is not correct, it could lead to capital flows. We also need to watch various changes in the international (market), which could lead to changes in capital flows, especially for emerging economies.”
“Fiscal as well as monetary policies have reached their limits. If you want the real economy to grow there are no shortcuts which avoid reforms.
“Talking about further stimulus just distracts from the real tasks at hand.
“We therefore do not agree on a G20 fiscal stimulus package as some argue in case outlook risks materialize.
“There is still considerable stimulus in the system: Monetary policy is extremely accommodative to the point that it may even be counterproductive in terms of negative side effects on banks, policies and growth.
“The debt financed growth model has reached its limits. It is even causing new problems, raising debt, causing bubbles and excessive risk taking, zombifying the economy.
“Clearly, today, the indebtedness of the private and public sector, including the high leverage of banks and households, as well as a lack of structural reforms, hinder sustainable growth.”
ITALIAN CENTRAL BANK GOVERNOR AND ECB GOVERNING COUNCIL MEMBER IGNAZIO VISCO, IN COMMENTS TO REUTERS:
Visco told Reuters the two-day event was focused on sharing ideas and that formulating a concrete action was not an “objective”.
“It is strange to expect a concrete action. A concrete action in terms of policy is done by central banks who have the responsibility vis-a-vis their targets or their mandates - price stability, financial stability. It is the responsibility of fiscal authorities to use the fiscal space where it is important. You cannot decide a major infrastructure for the world.”
Visco added that China’s slowdown was not totally unexpected, but that a lack of transparency had sharpened its impact. “It is, at the end, more or less what was expected, but the uncertainty around it has been dramatic and dramatised also by the developments in the financial market.”
Gurria said that the G20 had “talked the talk” but needed to show it could come up with concrete measures after failing to hit growth targets it set in Sydney in 2014.
The G20 nations agreed then to lift their collective GDP growth by at least 2 percentage points above what the current economic policies would achieve over a five-year period.
“We are lagging behind on that relatively modest effort of the 2 percent,” said Gurria, adding the group was only about a third of the way to its goal. “We are not in a very good way today; something is either not working very well or is broken.”
INTERNATIONAL MONETARY FUND MANAGING DIRECTOR CHRISTINE LAGARDE:
Full text of speech: here
Full text of speech: here
“Luckily the Chinese economy has the policy space and also a lot of tough issues ahead of us, so we will do our best to move forward the reform process.
“The space is evolving and changing and countries keep delaying their necessary reform agenda and that might undermine the space for the reform, so they might be standing at the edge of a cliff and have two options - either you fall over the cliff, or you push forward a very painful reform process.
“A person might fall off the cliff, but I don’t think a country will fall off the cliff, so we have no option but to push forward the painful reform process, the sooner the better.”
“Through concerted effort the world economy has been put back on a recovery track, however, the recovery process has been modest and uneven.
“The top priority on one hand would be to expand aggregate demand, on the other hand, enhance structural reform.
“We will focus on a global economy growth framework, investment infrastructure, international financial architecture, financial sector reforms, international taxation collaboration, anti-terrorism financing, green finance and climate finance. Altogether eight topics.”
Reporting by Kevin Yao, Samuel Shen, Gernot Heller and Jan Strupczewski, Adam Jourdan, Engen Tham, Nate Taplin and Brenda Goh; Editing by Jason Subler, Shri Navaratnam and Jacqueline Wong