China rejected any need for a special package for developing economies during a meeting of BRICS in St. Petersburg, today. It’s position was conveyed against the backdrop of Indian Prime Minister Manmohan Singh calling for an orderly exit of stimulus.
Ahead of a meeting of BRICS leaders in St. Petersburg on Thursday, China rejected any need for a special package for developing economies, saying their fundamentals remained strong, but agreed with India on the need for slow and orderly withdrawal of fiscal stimulus by the US.
China’s position was conveyed against the backdrop of Indian Prime Minister Manmohan Singh calling for an orderly exit of stimulus (the extra government spending instituted by some rich nations since the economic crisis surfaced in 2008), as they had the potential to harm the growth prospects of emerging economies.
“The US economy is showing some positive signs. It is recovering gradually and we welcome this,” China’s Vice Finance Minister Zhu Guangyao told reporters in this north-western city of Russia.
“But the United States must consider the spill-over effect of its monetary policy, especially the opportunity and the rhythm of its exit from ultra-loose monetary policy,” Zhu added.
The minister said the fundaments of the BRICS economies — Brazil, Russia, India, China and South Africa — continued to be strong. Hence they did not need external help to overcome the crisis. But internal realignments must continue.
“We think that currently all BRICS countries do not need special bailout plans but economic structural reforms are necessary.”
The Indian prime minister, here for the G20 Summit Thursday-Friday, has maintained that rich nations, which are showing signs of recovery, must not pursue policies that hurt the developing world and that the collective focus of all must be on job creation and investment promotion in a bid to spur growth and sustain it.
“Though there are encouraging signs of growth in industrialised countries, there is also a slowdown in emerging economies, which are facing the adverse impact of significant capital outflows,” he said in a statement ahead of the summit.
“I will emphasise in St. Petersburg the need for an orderly exit from the unconventional monetary policies being pursued by the developed world for the last few years, so as to avoid damaging the growth prospects of the developing world,” he added.
“It is also important that G20 encourages and promotes policy coordination among major economies in a manner that provides for a broad-based and sustained global economic recovery and growth.”
He was alluding to the talks of US Federal Reserve looking at successively reducing the fiscal stimulus that was being injected since 2008 to overcome the financial crisis.
The prime minister, who arrived here Wednesday evening, started his engagements with a meeting with the other BRICS leaders.
According to officials, the leadership of these five emerging economies are also expected to take up the issue of a $100-billion currency reserve fund they had agreed to in Durban in March this year to help similar countries and poor nations in easing their short-term liquidity pressures and keeping their financial stability.
All these countries, save China, have seen their currencies take a hit in recent months, with the Indian rupee losing 20 percent against the US dollar this fiscal due to a pull-out by foreign funds after the US central bank hinted it may ease fiscal stimulus soon.