G20 ‘breakthrough’: finance chiefs agree to keep tabs on economic reform
Broad consensus on framework to assess structural improvements, but differences remain between US and China
The world’s top economic policymakers have agreed upon a set of indicators to monitor progress in structural reforms, a move that could lead to a mechanism to name and shame laggard nations on the global stage.
The deal was revealed at the end of a two-day meeting of finance ministers and central bank governors from the world’s top 20 economies, including the US, China, Japan, Germany and Britain, held in Chengdu in Sichuan province.
In light of the fragile world economic recovery and fresh uncertainties over Brexit, G20 officials reiterated that member countries would use monetary and fiscal policy tools – as well as structural changes – on an individual and collective basis to keep growth on track. They also reaffirmed they would refrain from competitive currency devaluations.
Finance Minister Lou Jiwei described the agreement on structural reforms as a “landmark” breakthrough for the G20. Every member had virtually agreed to a review system that would assess domestic reforms in areas from free trade to the labour market. Indicators agreed upon included workforce productivity, he said.
Every country is putting pressure on itself [in the area of structural reform], and it shows a sense of responsibility and accountability
“Every country is putting pressure on itself [in the area of structural reform], and it shows a sense of responsibility and accountability,” Lou said after the meeting.
The meeting, the final ministerial gathering before the G20 leaders’ summit in Hangzhou in Zhejiang province in early September, is one of the biggest gatherings of leading economic policymakers.
China, which holds the G20 presidency this year, is trying hard to ensure the meetings generate real results and aren’t just talk shops. The grouping came into its own as a policy coordinating force in 2008 when nations worked together to avoid a global depression after the financial crisis.
But as the threat of disaster ebbed, the sense of urgency to align policy responses weakened.
At the Brisbane summit in 2014, world leaders set an “ambitious goal” to lift the G20’s gross domestic product by at least an additional 2 per cent by 2018. Talking about that goal now was “a bit awkward”, Lou said.
“It’s talking about ‘extra’, but what’s the basis? What’s the baseline? So, if the benchmark is changing, the meaning of ‘extra’ will change,” he said.
World growth was now 1 per cent higher than if G20 nations had not adopted any recommended polices to spur growth, he said.
They would continue to work to achieve the additional 1 per cent, he said.
Members also agreed to finalise a report on updated growth strategies and accountability before the Hangzhou meeting.
Although every member had endorsed structural reforms, differences over what should be done and how remained wide, especially between the world’s two biggest economies.
Lou said priority reforms in China were different from those in the United States.
The concern we have over China’s level of commitment ... of implementing reforms it pledged ... has been consistent throughout
“The US is ... emphasising more the demand side,” Lou said. “But China is seeing the key problem on the supply side.”
US Treasury Secretary Jack Lew said in a separate press briefing that growth and reform could go together, and were not trade-offs. Washington had always pressed China to stick to market-oriented reforms, he said.
“Issues and concerns about China’s economy when we met in Shanghai were more in the news then than it might be today,” he said, referring to a G20 meeting of finance ministers and central bank governors held in February.
“But the concern we have over China’s level of commitment ... of implementing reforms it pledged ... has been consistent throughout.”
