G20 finance ministers gather in Shanghai from Friday with the global economy assailed on multiple fronts, from China’s slowing growth to weak commodity prices, amid simmering disagreements over how best to face the challenges.
The International Monetary Fund (IMF) on Wednesday warned risks of a “derailed recovery” are growing, citing China’s faltering economy, falling oil and commodities prices and financial market turbulence.
That came after the 34-member OECD cut its 2016 global growth forecast from 3.3 percent to 3.0 percent.
Ahead of the G20 meeting among the gleaming towers of Shanghai’s financial district, the IMF said: “Strong policy responses both at national and multi-lateral levels are needed to contain risks and propel the global economy to a more prosperous path.”
The G20 — which groups 19 countries and the European Union — was born in the wake of the 1997 Asian financial crisis and upgraded to a summit of leaders in 2008 to tackle the global financial crisis.
Now, global oil prices are at multi-year lows, the threat of Britain leaving the European Union in a possible “Brexit” is looming, and world bourses have tumbled since the start of the year.
U.S. Treasury Secretary Jacob Lew denied the situation had reached crisis levels, but chided other countries for relying too heavily on the United States to be the main engine for global growth.
“We can’t be the consumer of first and last resort. There needs to be more,” he told Bloomberg Television in an interview.
“It means that in countries that are big economies, regions that have big economies, they need to use policy tools.”
– China looms -German Finance Minister Wolfgang Schaeuble urged G20 central bankers to communicate better, criticizing conflicting U.S. Federal Reserve announcements on interest rates in an interview with national news agency DPA.
But he added: “We have to stop once and for all blaming each other ahead of these meetings to divert the attention from our own problems.”
China’s own travails will loom over the meeting after the world’s second-largest economy grew 6.9 percent in 2015 — the worst in a quarter century and a far cry from the fat years of double-digit increases.
A shock currency devaluation in August, which saw the normally stable yuan guided down nearly five percent in a week followed by another drop in January, raised suspicions Beijing is pursuing a currency war to make its exports cheaper. Chinese officials have denied the accusations.
A stock market crash starting in mid-June, during which China’s benchmark index lost more than 40 percent from its peak, has also raised alarm.
“China was the mainstay of global economic growth after 2008,” Yale University finance professor Chen Zhiwu told Agence France Presse. “Now people are worried about the opposite problem with China’s growth getting slower and slower.”
– Commodities crash -Prices of commodities, ranging from copper to coal, have plunged as China’s voracious appetite for raw materials diminishes, sending shock waves through producer economies such as Australia.
The price of oil has dropped from more than $100 a barrel in July 2014 to just over $30 in recent days, driven lower by slowing global growth and a booming supplies from the U.S. and Middle East.
Friday’s meeting will set the stage for a more high-profile G20 leaders summit hosted by Chinese President Xi Jinping on September 4-5 that will include U.S. President Barack Obama, which is envisioned as one of the highlights of Xi’s administration.
China has become more aggressive in the political and economic spheres under his leadership, and the Beijing-led Asian Infrastructure Investment Bank (AIIB), viewed by some as a rival to the World Bank, started operations last month.
Another new multilateral lender pushed by China — the New Development Bank for the BRICS countries of Brazil, Russia, India, China and South Africa — will sign agreements at the G20 finance meeting to start full-scale operations from its Shanghai headquarters.
“Now, all eyes are on the G20,” Xi said in a note to the G20 in December. “It should address critical issues affecting the global economy and endeavour to promote strong, sustainable and balanced growth.”