Financial Markets China: Latest Decision to Boost Trade

Author / Editor: Komal Singh / Lisa Saller, Lisa Saller

Recently, China’s central bank chief promised to avoid weakening its yuan to boost dropping exports as he tried to reassure nervous financial markets about his government’s handling of its economy and currency at the start of a closely watched gathering of global finance officials.

The International Monetary Fund cut its forecast for this year’s global growth by 0.2 percentage points last month to 3.4 percent.
The International Monetary Fund cut its forecast for this year’s global growth by 0.2 percentage points last month to 3.4 percent.
(Photo: Creative Commons, Flickr)

Beijing wanted to use the gathering of finance ministers and central bankers from the Group of 20 rich and developing countries to promote its campaign for a bigger voice in managing global trade and finance.

Instead, the government is trying it’s best to defend its reputation for economic competence following stock market and currency turmoil.

An important concern, despite repeated Chinese denials, is that Beijing will allow its yuan to decline in value to support struggling exporters. That expectation has driven an outflow of capital from China that spiked to a record $135 billion in December. “We will not resort to competitive depreciation to boost our advance in exports,” said Zhou Xiaochuan, governor of the People’s Bank of China, at a news conference.

Some of the officials attending the meeting include U.S. Treasury Secretary Jacob Lew and Federal Reserve Chairwoman Janet Yellen; China's finance minister, Lou Jiwei and their counterparts from Germany, Britain, Japan, South Korea, India and South Africa.

Overall, global growth has slowed to its lowest rate in two years and private sector forecasters say the danger of a worldwide recession is rising. The International Monetary Fund cut its forecast for this year’s global growth by 0.2 percentage points last month to 3.4 percent. It said another downgrade is likely in its April update.

Eurozone and Japanese officials have called for coordinated global action but have yet to state what they shall suggest at the Shanghai meeting. The foreign view of China’s economic health was shaken last year by a stock market collapse that wiped out $5 trillion in paper wealth. Recently, its main market index fell by an unusually large daily margin of 6.4 percent. Last year’s exports fell 2.8 percent from 2014, well below the official target of 6 percent growth in total trade.

The IMF managing director, Christine Lagarde, who was attending the Shanghai meeting, urged policymakers to speed up the pace of reforms. “We think they should go bold, they should go broad and they should go together,” said Lagarde. Referring to monetary and fiscal policy and structural reforms, she said, “There has to be action on all fronts.”

* Source: abcnews.go.com/International/wireStory/china-rules-weakening-yuan-boost-trade-37209088

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