Wednesday, September 27, 2017

China - Joint Press Release on Global Economic Issues

Recently, China issued this press release which is a summary of some recommendations on "promoting an open, invigorated, and inclusive World Economy". Below are a few key excerpts from the release.

"China's Premier Li Keqiang, together with World Bank Group (WBG) President Jim Yong Kim, International Monetary Fund (IMF) Managing Director Christine Lagarde, World Trade Organization (WTO) Director-General Roberto Azevedo, International Labor Organization (ILO) Director-General Guy Ryder, Organization for Economic Cooperation and Development (OECD) Secretary-General Angel Gurria and Financial Stability Board (FSB) Chairman Mark Carney held the "1+6" Roundtable Meeting under the theme of "Promoting an Open, Invigorated and Inclusive World Economy" in Beijing, September 12th 2017."

. . . . 

Economic Globalization

"Globalization has provided a strong momentum to world economic growth, promoted capital and commodity flows, advanced development of technology and civilization, and built a closer tie between people worldwide. Facing both challenges and opportunities, we need to guide the direction of economic globalization and make it more invigorated, inclusive, and sustainable. In order to release greater positive effects of economic globalization, all economies need to proactively advance economic reforms, innovate the growth model, and focus on inclusiveness of development, at the mean time, to strengthen international cooperation, avoid inward-looking policies, and fight against all kinds of protectionism, so as to promote an open world economy."

. . . . 

Trade and Investment

"Trade and investment are important engines for global economic growth. Promoting further liberalization and facilitation of trade and investment globally will help respond to the development challenges faced by all, and will contribute to achieving balanced and sustainable development. The rules-based multilateral trading system represented by WTO is an integral part of global economic governance, providing an institutional framework within which its members formulate multilateral trade rules, monitor trade policy implementation and resolve trade disputes. The multilateral trading system serves as the main channel for liberalization and facilitation of global trade and investment. Regional, bilateral and plurilateral trade agreements should complement rather than substitute the multilateral trading system. Efforts should be made to ensure that such agreements are open, transparent and inclusive."

. . . . 

Global Economic Governance

"We reiterate our commitment to a strong, quota-based, and adequately resourced IMF to preserve its role at the center of the Global Financial Safety Net. We support the work of the IMF to strengthen its cooperation with regional financing arrangements, and its ongoing work to further enhance the effectiveness of its lending toolkit. We look forward to the completion of the 15th General Review of IMF Quotas, including a new quota formula, by the Spring Meetings 2019 and no later than the Annual Meetings 2019. We welcome the establishment of the Joint China-IMF Capacity Development Center, and look forward to further cooperation in this area. We support the continued examination of the broader use of the SDR as a way to enhance the resilience of the international monetary system. We support the IMF's ongoing work on improving the analysis and monitoring of capital flows and the management of related risks, including the role of macro-prudential policy.

We reiterate our commitment to a strong WBG, adequately resourced to pursue its mission to eliminate extreme poverty and boost shared prosperity in partnership with others. In this context, we support the implementation of the WBG's shareholding review and look forward to its timely conclusion. Building on the strong shareholder confidence expressed via the record IDA18 replenishment, we also support capital increase at IBRD and IFC, aiming to enhance the financial capacities of the WBG's public and private sector arms. This will allow the WBG to better assist countries achieve their development goals, including by helping them to maximize development resources in a responsible way, and to promote global growth, stability and security.

We agreed that this meeting was productive and sends a positive signal of jointly addressing challenges, developing a more inclusive and mutually-beneficial economic globalization, and promoting an open world economy. We look forward to holding the next round table meeting at an appropriate time and place next year."
My added comments:

We constantly see articles (like this one) that imply that China desires to replace the US dollar as the global reserve currency with the Yuan. However, whenever China releases an official statement like the one above, we don't see anything like that mentioned. Instead we always see these key points:

- support for the IMF and its role as a lender of last resort and global safety new
- support for a broader role for the SDR (not the Yuan) 
- support for resources for the World Bank and its programs

We know China is adding enormous amounts of gold to its reserves and also does want to see broader use of the Yuan as well globally. But, at least in public statements like this, China always points to the SDR as its preference as a potential US dollar replacement. Also, in this press release it is very clear that no plan to actually use the SDR to replace the US dollar exists right now as it talks about the IMF study in progress on the SDR going on for quite some time into the future. This is consistent with what we have reported here over and over and in line with what experts we view as high credibility sources have told us. 

Added notes: Here are a couple of related articles that talk about the possible Yuan-gold-oil linkage:


  1. Not sure why this gold backed yuan contract for oil keeps spreading - where is the contract, which Chinese official stated this was coming to the table? Everyone continues to discuss this as if it is a foregone conclusion but no one can provide a shred of evidence to support the idea. Please prove me wrong and someone, provide the source links to the Chinese official and source link to the contract.

  2. Good point and something I also watch for but cannot find yet. I will continue to watch for any news and will certainly report it if I can find it. It would certainly be significant news if it were to happen. But again, we need official confirmation and action to show up. China constantly calls for the SDR to replace the US dollar, but my sources indicate that is not something likely to take place any time soon either. So, we just continue to follow events to see what actually does happen.