UPDATE2: G-20 vows to take action to keep economic recovery on track

Finance chiefs of the Group of 20 economies pledged to take action to keep the global economic recovery on track as they concluded their talks in Ankara on Saturday, sharing concern over the global slowdown amid the ongoing slump in China.

In a communique, finance ministers and central bankers from the G-20 developed and emerging economies acknowledged recent volatility in financial markets and its underlying economic conditions, without specifically referring to China.

The G-20 leaders called for moving toward more market determined exchange rate systems and vowed to “refrain from competitive devaluations” aimed at boosting exports, after China devalued the yuan last month.

“We welcome the strengthening economic activity in some economies, but global growth falls short of expectations,” they said after a two-day gathering in the Turkish capital.

“We have pledged to take decisive action to keep the economic recovery on track and we are confident the global economic recovery will gain speed,” the communique said, as they try to calm down turbulent moves in the global financial markets.

In China’s explanation over stock plunges, Zhou Xiaochuan, governor of the People’s Bank of China, made comments in Friday’s session that a bubble in China has seemingly burst, according to sources close to the meeting.

During the talks, Japan and some other countries urged China to carry out structural reforms, with Japanese Finance Minister Taro Aso calling on the country to address issues such as an excess in investment and nonperforming loans in the banking sector.

“It has come to surface that (each country) needs to tackle structural problems,” Aso said at a press conference after the meeting, apparently referring to China.

Aso criticized the Chinese government’s response to plunges in the Shanghai stock market, saying, “The way it dealt with the matter was market intervention that is not seen in an ordinary country.”

U.S. Treasury Secretary Jack Lew, meanwhile, called on his Chinese counterpart Lou Jiwei to accelerate the transition from economic growth led by exports and investment to greater reliance on personal spending, according to the U.S. government.

The meeting came as global stocks have suffered major losses following China’s surprise move to devalue the yuan, while a decision by the U.S. central bank on whether to raise interest rates is looming.

There are also persisting worries over the possible spillover of the decelerating Chinese economy onto emerging economies, which already face the risk of fund outflows if the U.S. Federal Reserve decides to raise interest rates as early as this month.

In an apparent reference to the United States, the G-20 leaders said monetary policy tightening is more likely in some advanced economies on the back of economic improvement.

Meanwhile, the leaders warned against excessive reliance on monetary policies, saying, “monetary policy alone cannot lead to balanced growth.”

“We will carefully calibrate and clearly communicate our actions, especially against the backdrop of major monetary and other policy decisions, to minimize negative spillovers, mitigate uncertainty and promote transparency,” they said.

Much of the focus at the meeting was placed on the current conditions and outlook for the slowing Chinese economy. Sell-offs in global stock markets took place in August as the yuan devaluations stirred fears the world’s second-largest economy may be in worse shape than previously believed.

The G-20 groups Argentina, Australia, Brazil, Britain, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United States and the European Union.

==Kyodo

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