BEIJING: The world cannot depend on China alone to save it from a Brexit-induced downturn, the country’s Premier said Friday, ahead of hosting a meeting of G20 finance ministers.
Government representatives and central bank chiefs from the world’s top 20 economies gather in the southwestern Chinese city of Chengdu this weekend with the impact of Britain’s vote to leave the European Union (EU) high on the agenda.
China’s economic boom of recent decades has seen it become the world’s second-largest economy and a key driver of global growth, with a massive stimulus package Beijing launched in 2008 credited with helping ease the pain of the global financial crisis.
But investors worldwide have worried over its slowing expansion, while Britain’s referendum last month has heightened risks and instability.
“It is impossible to carry all of the burden of the whole world on our shoulders,” said Premier Li Keqiang, after meeting the heads of six global economic organizations, including the World Bank and International Monetary Fund (IMF) in Beijing.
The IMF just days ago predicted that uncertainty created by Britain’s vote to leave the EU, commonly referred to as Brexit, would slow the world economy into next year.
In an update to its April forecast, the IMF lowered its forecasts for global growth this year and next by 0.1 percent, to 3.1 percent and 3.5 percent respectively.
“Failure to achieve clarity about the future relationship between the UK (United Kingdom) and the European Union would add to uncertainty and weigh on confidence,” IMF staff warned in a report for the G20 finance ministers’ meeting issued on Thursday.
“And, if not managed well, China’s transition could further raise volatility around the baseline path of the global economy,” it said.
China is seeking to restructure its economy to make the spending power of its nearly 1.4 billion people a key driver for growth, instead of massive government investment and cheap exports.
But the transition has caused growth to sputter. The Asian giant’s economy expanded at 6.7 percent in the April-June period, the same as the first three months of the year and slowing from 6.9 percent in 2015—its weakest annual rate in a quarter of a century.
But the IMF has just upped its forecast for Chinese growth this year by 0.1 percent, to 6.6 percent.
Li said the IMF hike put “pressure” on China to “maintain growth and stability,” but he vowed to push economic reforms such as making its yuan currency trade more freely—something Beijing has repeatedly promised, and a key sticking point with the United States and other major trade partners.
“Given the financial fluctuations as a result of Brexit, China will advance market-based reform of its exchange rate,” Li said, adding: “We will not engage in a trade war or currency war.”
Recent weakness in the yuan, which touched a six-year low earlier this week before rebounding, renewed worries that China is allowing the unit to slide to boost its exports.
Beijing also finds itself in a dispute with the EU over whether or not it deserves to be granted market economy status, a designation that would make it much harder for major economies to fight Beijing over alleged unfair trading practices.
In Chengdu, representatives from the world’s biggest industrialized and emerging economies will gather to discuss the impact of Brexit and other challenges to the global economy.
German finance minister Wolfgang Schaeuble will share a meal with Britain’s new finance chief Philip Hammond on Saturday, their first meeting in person.
A German ministerial source said Berlin did not expect the G20 to make a formal statement on Brexit, “but it will certainly be one of the topics under discussion.”
The world economic situation was “not as bad as some have thought”, the source said, adding that the meeting would send “a signal of stability and reliability.”