China facing pressure to reassure on economy at G20 meeting

China faces pressure to reassure nerve-wracked world markets over how it is steering its slowing economy and managing its currency at tomorrow's gathering of finance ministers and central bankers from the United States, Europe and other major economies in Shanghai.
Such meetings of the Group of 20 major rich and developing economies tend to yield no major policy changes.
But with anxiety rising over lackluster global growth, investors are looking for reassurance from Beijing, which has been seeking a greater say in guiding global finance and trade but seen its reputation for economic competence battered by recent market turmoil.
Economists and other governments complain Beijing has fueled that volatility by failing to communicate policy changes clearly.

A collapse in Chinese stock prices last year wiped out some USD 5 trillion in paper wealth. That coincided with the surprise introduction in August of a new mechanism for setting the yuan's exchange rate that has allowed a gradual decline in its value against the dollar.
The decline has deepened concern, despite repeated Chinese denials, that Beijing might weaken its currency further to boost exports. That has helped to drive an outflow of capital from China that spiked to a record USD 135 billion in December.

In a report released ahead of the Shanghai meeting, the IMF urged G20 leaders to support China's efforts to restructure its economy and reform state-owned industries but also urged Beijing to "ensure clear communication of their exchange rate policies."

Companies and investors want at least a statement that "makes it possible to reduce uncertainty" about Chinese industrial and currency policy, said Tim Condon, head of Asian research for investment bank ING.
"The global economic issue of the day is China's industrial restructuring and the consequences of the slow pace at which it is proceeding," said Condon.
US Treasury Secretary Jacob Lew said in an interview broadcast yesterday by Bloomberg Television that the meeting would likely produce "a more stable understanding of what the future may look like" including greater clarity from Beijing about its plans.
However, Lew said he did not expect the discussions to produce specific plans of "what each country is going to do and how."

Other officials due to attend include US Federal Reserve Chairwoman Janet Yellen; China's finance minister, Lou Jiwei, and its central bank governor, Zhou Xiaochuan, and their counterparts from Europe, Japan, South Korea, India and South Africa.
They are meeting as global growth has dipped to its lowest level in two years and private sector forecasters say the danger of a worldwide recession is rising.