When China presented the programme for its G20 presidency to top officials from the world’s leading economies last week, Beijing laid out four economically wholesome priorities.
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China, state councillor Yang Jiechi told the “Sherpas” gathered in Beijing, was eager for the G20 to break “a new path for growth” and pursue “more effective” global economic governance, “robust international trade” and “inclusive development”.
But Mr Yang, China’s top foreign policy official, should probably have added a fifth priority: convincing the world’s other leading economies that China’s leaders were still in control.
Tumbling markets and anxieties over the Chinese economy have given President Xi Jinping and his fellow Communist party leaders a more difficult start to Beijing’s stint as the G20’s rotating chair than it had hoped.
But the tricky start to 2016 has also left officials and analysts across the world’s other leading economies scratching their heads and pondering new concerns over the impact of China’s woes on their own economies.
US Treasury Secretary Jacob Lew, in a phone conversation with Liu He, China’s director of the office of the central leading group on economic and financial affairs, discussed the importance of China clearly communicating its policies and actions to the market — something the country has come under fire for in the wake of currency and stock market turmoil.
Mr Lew also reiterated the importance of China supporting household income and rebalancing towards consumption-led growth, including through appropriate fiscal policies, and his belief that doing so would enable it to succeed in its planned economy transition to a consumption-led model.
“We consider the Chinese economy the biggest source of uncertainty for the Korean economy this year,” says Chang Min, head of the research department at the Bank of Korea.
That anxiety is repeated across the G20 economies, with China’s economic management overtaking Federal Reserve policy as the biggest immediate concern for the global economy.
In the US, some economists have questioned whether, given the turmoil in China, the Fed acted too soon when it raised rates in December for the first time in almost a decade.
George Osborne, the UK’s chancellor of the exchequer, has become markedly more pessimistic since the start of the new year, warning the British economy is at risk of being buffeted by a “dangerous cocktail of new threats”, including slower China growth and the knock-on fall in commodity prices, recession in Russia and Brazil and the decline in global stock markets.
The International Monetary Fund, meanwhile, is facing questions over whether it unwittingly contributed to pressure on China’s renminbi via its decision in November to admit the currency to the elite basket used to value the fund’s special drawing rights.
In public, G20 officials have mostly continued to express support for the Chinese leadership and its efforts to rebalance the economy away from one driven by exports to one more dependent on domestic consumption. They have also played down fears that any weakening of the renminbi should be seen as the first blast of a currency war.
In Paris last week, Christine Lagarde, IMF managing director, praised China for embarking on “an ambitious multiyear rebalancing of its economy, toward slower and more sustainable growth” that “in the long run, will benefit everybody”.
Asked about the swings in China and their impact on the US economy earlier this month, Jack Lew, US treasury secretary, said: “The challenge that I think we have to keep our eye on is: will China stick to the reform programmes that it has committed to? Will it continue to open up its markets?”
But behind closed doors, anxieties remain about the capacity of Chinese officials to communicate with the markets and manage the turmoil.
