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G20 Finance Ministers and Central Bank Governors hold mission to maintain financial stability

Editor: Li Kun 丨CCTV.com

02-29-2016 16:51 BJT

By Ren Kangyu, G20 Research Institute of Beijing Foreign Studies University

The first G20 Finance Ministers and Central Bank Governors Meeting in 2016 was held in Shanghai on Feb. 26-27, and China will be the host country for the G20 Summit 2016. The G20 meeting Shanghai Communique was issued on Feb. 27. Financial and monetary policies serve keys to national macroeconomic policies.

Holding the Finance Ministers and Central Bank Governors Meeting at the beginning of the year could enhance better cooperation on macroeconomic policies to prepare for the forthcoming G20 leaders' Summit in Hangzhou in September.

China has suffered a severe downturn of its stock markets, while currency exchange rate reforms, RMB devaluation, foreign exchange reserves dropping, capital outflows and many other forms of financial volatility have occurred recently.

Many emerging market countries are also experiencing currency devaluation, capital outflows and other financial difficulties. Even the United States, Japan and other developed countries and regions in Europe remain uncertain about what monetary policies they will undertake.

The G20 platform can promote financial cooperation among G20 countries, making it a priority issue for the meeting. The currency exchange rate is a key indicator of the international financial sector. During the past year, the devaluation of the RMB and other currencies has caused much concern.

Some countries' had experienced uneven developments during the global economic recovery, and now we are in a post-crisis era, causing different exchange rate policies to arise.

The G20 meeting Shanghai Communique has mentioned that excessive exchange rate volatility and disorderly adjustments would impact economic and financial stability. Beijing will hold close discussions on foreign exchange markets with G20 member states.

Chinese Prime Minister Li Keqiang said in his video speech that there exists no basis for continuous RMB exchange rate depreciation. Beijing holds a commitment to the exchange rate, avoiding competitive devaluations and would not peg the exchange rate for the sake of competition.

Due to currency devaluations, China and other developing countries of the G20 had to dip into foreign exchange reserves and try to slow down capital outflows in 2015. 

However, the People's Bank of China Governor Zhou Xiaochuan mentioned in a press conference that many countries and China included have accumulated high foreign exchange reserves that would eventually go down after reaching a high point.

Is it necessary to worry about these macroeconomic factors causing an economic downturn? Currently, China has sufficient reserve funds to handle all foreign payments.

However to ensure balanced macroeconomic policies, China relies on the G20 platform to advocate for better monitoring of capital flows and timely identification of financial risks, utilizing review policy tools to contend with large-scale capital flows.

Different currency movements and macroeconomic performances also spark different government responses on state monetary policies. Under a new economic normal adjustment, China intends to implement a prudent monetary policy.

Other countries would undertake appropriate monetary policies according to their situations. Accordingly, G20 countries should pay more attention to monetary policies coordination among member states to reduce uncertainties, increase transparency and lessen negative consequences.

The G20 meeting endorses resilient, sustainable and balanced growth, along with financial stability. The meeting has approved the work plan for global financial architecture to promote smooth operations of the international monetary system that supports a strong quota-based and well-resourced IMF.

In the past few years, G20 has made significant achievements to maintain financial stability. China would assume its responsibility to lead the G20 to monitor global economic and financial conditions and seek wider financial cooperation for a more stable financial environment.

 

( The opinions expressed here do not necessarily reflect the opinions of Panview or CCTV.com. )

 

 

Panview offers a new window of understanding the world as well as China through the views, opinions, and analysis of experts. We also welcome outside submissions, so feel free to send in your own editorials to "globalopinion@vip.cntv.cn" for consideration.

Panview offers an alternative angle on China and the rest of the world through the analyses and opinions of experts. We also welcome outside submissions, so feel free to send in your own editorials to "globalopinion@vip.cntv.cn" for consideration.

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