Officials in the United States and Japan have urged global financial leaders and central bankers to make the Chinese economy a key focus of talks of the Group of Twenty major economies when they meet on Friday and Saturday in Turkey. Just how much will be accomplished during the talks, however, is uncertain, analysts said.
China’s market turmoil and devaluation of its currency last month sent shockwaves through global stock and commodity markets in recent weeks. Stocks in China plunged nearly 40 percent since a high in mid-June and a slew of poor economic data that followed further fueled concerns.
Lack of transparency
On Tuesday, Japan’s finance minister said it is important to understand the structural issues behind what is going on and called for a “frank debate at the G20 about what is happening in the Chinese economy.”
A U.S. official speaking ahead of the meetings also echoed concerns, calling on Beijing to “carefully communicate its policy intentions and actions to financial markets.”
FILE - A customer counts Chinese Yuan notes at a market in Beijing, Aug. 12, 2015.
Such calls were new, said Raymond Yeung, a senior economist with ANZ in Hong Kong.
“Perhaps this is the first time that other countries want China to explain more about what they have been doing in terms of the reform, for example, the change of the exchange rate regime,” Yeung said. “But it doesn’t seem to me an international norm to require other countries to do so.”
While Yeung said he agrees that what has happened in the past few weeks has highlighted the influence of Chinese domestic markets and its policies, he said he does not see a need for a global effort as was needed during the 2008 U.S. subprime mortgage crisis.
“To some extent, the current issues facing China are domestic reforms. And I don’t see that platform… will address such domestic issues,” he said.
FILE - Piles of steel pipes to be exported are seen in front of cranes at a port in Lianyungang, Jiangsu province, March 7, 2015.
China has been working to wean itself away from an over-reliance on exports to boost its economy and transition toward a more consumption-based model.
While the shift has not been easy, Chinese officials have insisted the situation is under control.
Recent actions, such as the devaluation of its currency or China’s massive efforts to slow the slide of its stock market, raised questions about whether China was truly committed to market reforms or — in the case of the currency - merely taking measures to boost exports.
A delicate balance
Oh Ei Sun, a senior fellow at the S. Rajaratnam School of International Studies in Singapore, said China is trying to balance very gingerly between building a free market economy and a free economy with Chinese characteristics.
“I don’t think there’s a consensus in more transparency of the economic decision-making process in China because China views outsiders with suspicion… and the economic policy-making process is seen as a matter of national security and national interests, which Chinese authorities won’t subject to the prying eyes of foreigners,” he said.
Peter Drysdale, an economics professor at the Australian National University, said next year's G20 Summit in Hangzhou might be a better occasion for it to articulate its reform strategies.
That meeting, he said, will be a very important opportunity for China to take big steps.
Those steps “might include further liberalization of financial markets, not only interest rates, but also foreign ownership of financial institutions and licenses and the participation of new private banks in the financial sector,” Drysdale said.