WASHINGTON, D.C.: Worried about global growth, the United States will press G20 powers to boost their economies when the group’s finance chiefs meet in Shanghai this week, a senior US official said on Monday (Tuesday in Manila).
The official said that Treasury Secretary Jacob Lew, representing Washington at the Group of 20 meeting, will also travel to Beijing to press on his Chinese counterpart the need to stick to its reform plans.
“Globally there remains a shortage of aggregate demand,” the Treasury official said, insisting on anonymity.
“We think the global economy can do much better.”
The official pointed to China’s slowdown and weak growth in Europe as contributing to overall weak demand around the world.
He said Lew would recommend to his G20 counterparts at the February 26 to 27 meeting “that all levers of policy be deployed,” meaning fiscal spending, monetary policy and structural reforms.
The official said that it was especially important that countries with strong finances spend and invest more to boost demand, at home and internationally.
“More and more it is important that those countries with fiscal space utilize that fiscal space,” he said.
The US will also emphasize the need for countries to stick to pledges not to engage in competitive devaluations of currencies to boost export competitiveness, a crucial issue as China’s yuan weakens, challenging its rivals to follow suit.
Other issues on the docket include providing better access for the world’s poorest to financial systems; strengthening derivatives regulation; and preventing multinational companies from minimizing their taxes by shifting revenues and business to low- and no-tax havens.
The US will also press China, the world’s number-two economy, to follow through with its reforms as crucial to strengthening the world economy.
After the G20 meeting Lew will meet with his Chinese counterpart in Beijing “to urge China to implement the market-based economic reforms that it has committed to.”
“He will urge the authorities to pursue policies that support domestic demand, especially fiscal policies,” the official said.
Treasury Under Secretary for International Affairs Nathan Sheets, in an opinion piece published Sunday on Medium, wrote that market turmoil has put a spotlight on “the need for China to accelerate the pace of its transition to a more consumption-led economy.”
He also said that “clear communication to the market is critical” about China’s policy to free up trading in its yuan currency.