G-20 finance chiefs agree to use all policy steps for market stability

The meeting of the Group of 20 finance ministers and central bankers in Shanghai was held as investors were closely watching whether they could send a message strong enough to assuage anxiety in global markets stemming from stock sell-offs and a rise in currency volatility this year.
In a joint statement issued after the two-day meeting, they dismissed the perception that another financial crisis may be imminent, saying that "the magnitude of recent market volatility has not reflected the underlying fundamentals of the global economy."
Japanese Finance Minister Taro Aso, when he met with the press, echoed this view, saying that financial markets have become "too pessimistic" about the global economy, although "economic fundamentals are extremely favorable."
Knowing that attention on the meeting was high, they did their best to find consensus on what they can say, despite divergent economic policies and conditions, with the hope of restoring confidence in global markets, according to officials involved in drafting the communique.
"We will use fiscal policy flexibly to strengthen growth, job creation and confidence, while enhancing resilience and ensuring debt as a share of GDP is on a sustainable path," the document said.
In their latest assessment of the world economy, the leaders said its "recovery continues, but it remains uneven and falls short of our ambition for strong, sustainable and balanced growth."
"Downside risks and vulnerabilities have risen," they said, citing "escalated geopolitical tensions, the shock of a potential U.K. exit from the European Union and a large and increasing number of refugees in some regions" as major concerns, in addition to volatile capital flows and a large drop of commodity prices.
China, which hosted the G-20 forum for the first time, was at the center of attention as a slowdown in its growth, in part due to overcapacity, and opaque monetary policies have been a major trigger, if not the only reason, for the recent market turbulence.
China has been struggling to curb industrial excess capacity, especially in the steel, coal and housing sectors. But progress has been slow as supply-side reforms such as squeezing out so-called "zombie" companies could result in massive layoffs and have a huge impact on consumption.
Chinese Finance Minister Lou Jiwei, who co-chaired the Shanghai meeting, told a press conference that more than ever before the G-20's debate focused on the essential role of structural reforms.
The ministers and central bankers from the Group of Seven industrialized countries, including Britain, Germany, Japan and the United States, but not China, had a separate informal meeting on Saturday.
They met in the Chinese economic hub early in the morning before the G-20 gathering started its second day of discussions, officials with direct knowledge of the situation said.
In line with their past commitments, the top G-20 policymakers agreed to "refrain from competitive devaluations" and said they will not target their respective "exchange rates for competitive purposes."
Most notably China, the world's second-largest economy which has been trying to achieve a well-managed rebalancing of its growth model, was under international pressure in recent weeks to explain its foreign exchange and other monetary policies more clearly.
On this point, the G-20 finance leaders said, "We will calibrate and clearly communicate our macroeconomic and structural actions to reduce policy uncertainty, minimize negative spillovers and promote transparency."
They even incorporated a sentence that says, "We will consult closely on exchange markets."
While there was opposition to including this sentence from some countries out of worries that they may not be able to decide independently and freely on currency policies hereafter, such as the time of intervention, it was endorsed after last-minute negotiations, according to the G-20 officials.
In a video message to the opening of the meeting Friday night, Chinese Premier Li Keqiang said China has "the confidence to handle the complex situation at home and abroad."
After this year's first major event of economic heavyweights, U.S. Treasury Secretary Jack Lew said he believes "China has the necessary tools, including through fiscal policies, to support household demand and succeed in its economic transition."
China's economic slowdown has sharply pulled down oil and other commodity prices, with investors showing risk aversion in the preference of their assets and pulling money out of emerging countries.
The policymakers of the leading developed and developing economies also intensively discussed how best to tackle the capital outflows, which have accelerated after the U.S. central bank ended seven years of near-zero interest rates in December, according to the G-20 officials.
During the G-20 meeting, China said it plans to unveil more specifics of its economic policy direction, in particular with regard to the ongoing structural reforms, next week when the country's top legislature, the National People's Congress, will hold an annual session, said the officials, who spoke on condition of anonymity.