Lou Jiwei sheds light on G-20 negotiations and the reasoning behind a successful outcome
(From Caixin Online)
By staff reporter Xing Yun
Acknowledge the elephant in the room, but don’t exaggerate its weight. That’s the simple way of expressing Minister of Finance Lou Jiwei’s attitude as a policymaker toward the big risks looming over the global financial system, including China’s US$ 12 trillion economy.
It’s a view Lou shared while hosting major-economy counterparts at a two-day meeting of the Group of 20 finance ministers and central bank governors in Shanghai. It also shaped his comments on tax reform and “government support” for banks saddled with bad debt at a National People’s Congress press conference March 7 in Beijing.
Lou also stressed the point on March 2 during an interview with Caixin. “We should face up to problems and risks,” he said at his Beijing office, “but not exaggerate them.”
Lou and People’s Bank of China Governor Zhou Xiaochuan coordinated the February 26-27 meeting. In the end, the Chinese delegates agreed with other G-20 leaders to use collectively and as individual countries all available policy tools – including those in the monetary, fiscal and structural arenas – to foster market confidence and strengthen a global economic recovery, according to a post-meeting communiqué.
In the interview, Lou described the successful G-20 negotiations on fiscal reform and monetary policy that preceded the consensus agreement. He noted that, in general, finance officials from the world’s largest economies share a cautiously optimistic outlook in the face of increasingly serious vulnerabilities and risks.
Moreover, Lou said the final agreement “basically met China’s expectations.”
Some G-20 leaders clashed over how to apply fiscal policies, he said. But eventually they agreed to use these tools “flexibly” to strengthen economic growth, job creation and market confidence, while working toward sustainable debt management. And for the first time, Lou said, G-20 leaders committed to pursuing structural reforms in their countries to strengthen the global economy.
Key excerpts from Lou’s interview follow.
Caixin: What conclusions did finance leaders at the G-20 meeting in Shanghai reach about prospects for the global economy?
Lou Jiwei: I closely watched global market moves during the Lunar New Year holidays. I saw fluctuations in stock, bond, commodity and gold prices. It seems global investors hold a pessimistic outlook. A general view emerging from the meeting was that recent market volatility does not reflect underlying fundamentals of the global economy. We forecast that most advanced economies will expand at a moderate pace, and that growth in key emerging market economies will remain strong. The consensus reached is that we should face up to problems and risks, but not exaggerate them. Read more