China ready to lead the way forward
Chinese economists and financial experts from China expect the G20 summit in Washington on November 15 will focus on currency realignment, international liquidity and fiscal stimulus issues.
Maintaining stable growth is considered by the government and many economists as key to get over the financial turbulence and keeping recession from getting worse.
China announced 4 trillion yuan stimulus package on Nov 9th. This is seen as a major initiative by China to get rid of recession. In this case, a lot of sections can get help, so that SMEs like BPOVIA in Nanjing will obtain more support. Jing Ulrich, managing director and chairwoman of China Equities, J.P. Morgan, said, “With nearly $2 trillion in foreign reserves and a budget surplus, China has wider scope for fiscal stimulus than governments in many developing economies that face big external deficits and high debt burdens.”
While establishing a new international financial architecture would be difficult and time-consuming, economists said the summit could help in providing a platform for both developed countries and large emerged markets to communicate with each other. They believed that G20 member nations will at least make an agreement on how to move forward through further corporation and mutual understanding. Economists considered China as big enough to make a voice today. Therefore they believe China would play a bigger role and take more responsibility in G20 summit in line with its rising economic size.
Playing an active role in rebuilding the financial architecture and helping in global economic stability will bring China the international prestige. In the short term, China is expected to provide US dollar liquidity to the central banks of many countries and continue to hold US dollar assets in foreign exchange reserves; and adopt a more flexible exchange rate system in the medium term.
Because of China’s growing prominence, some economists suggest giving a stronger position to China to bring its function into full play in forming the new international financial architect. “Increasing China’s role in important international Monetary Fund and the World Bank is likely to be discussed.” Said Wang Tao, an economist of UBS Securities told China Daily. This is agreed by other economists. According to Stephen Green, head of research, China, Standard Chartered, other countries, especially Europeans are more open to talking about reallocating IMF voting rights to mirror the new world economy. So anything China can do should be seriously considered, including recapitalizing the IMF.
However, experts and economists are not so sure that whether European countries are really supporting China’s rising position in international organizations because such a step may reduce their influence in international financial system.
The US government will also make a brief plan to other countries on how they can deal with financial turmoil and how they are going to trigger domestic demand and stabilize the financial system.
Experts will also pay special attention on how The US would provide liquidity through swap facilities to help stabilize currencies of emerging markets and how they would support the housing sector.
From the economists’ point of view, although the US and European countries expect China to take a more flexible exchange rate system, they do not expect any big change in currency policy in the following years. “We think that Beijing will keep the renminbi stable against the US dollar, and this will provide some stability in Asia. Competitive devaluations around the region would add to instability at this point,” Stephen Green told China Daily.
Wang expected the exchange rate of renminbi against US dollar to remain at 6.8 for the coming years.
Experts and economists think that the summit provides a platform for the senior executives to reconsider the world-wide consequences of their domestic policy in a more globalized world.
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