Friday 26 February 2016

G20 kicks off in China with focus on global economic turmoil

The G20 summit of finance ministers and central bankers being held in Shanghai kicked off today with much attention drawn on the turmoil facing world leaders as a tougher economic climate makes policy flexibility that much harder. The forum was created to coordinate economic policies amongst the biggest economic nations in the world in an effort to align the direction of the global economy so to allow for greater control through conformity as opposed to dealing with each nation's issues separately.

However against the backdrop of the recently held World Economic Forum held in Davos in January, this meeting contains more substance in the sense that it doesn't allow the main discussions on the global economic outlook to be drowned out by the celebrity activists wanting to push an agenda. The forum brings together those policy makers that have the ability to move markets with their influential positions of power especially when it comes to matters of the economy because without proper execution of economic policy there can be no initiatives aimed at improving or confronting the issues activists highlight.  

With Shanghai being the host city for this leg of the summit a lot is resting on monetary authorities to put on a good exhibition of how it will manage the risks created from a newly reformed financial system that is seemingly unsettling global markets with a horde of problems cropping up. People's Bank of China Governor Zhou Xiaochuan said that the nation wasn't going to devalue its currency the Yuan and provided clarity on the scope of reform happening in the economy.

Xiaochuan's comments reiterates the point that the Chinese government wishes to make, the importance of its nation's financial system to the rest of the world is tantamount to its own success and the current mishaps shown up over the past months aren't overlooked with the need to actively inject confidence into the system.
But just as important is a coordinated effort from each member nation that happenings to be getting harder with every meeting. German Finance minister Wolfgang Schauble warned that both fiscal and monetary stimulus measures had been exhausted and any continuation of these would present further risks to the world economy. He noted that more focus needed to be drawn on structural issues that needed to be addressed rather than simply fuelling the problem with expansionary programs that have failed so far.

The point highlights a trend facing many developed economies experiencing stagnate activity in both consumer and manufacturing sectors leading to an ever contractionary environment. A certain development from these problematic situations will be an increasing focus from academics on how to mend these challenges going forward however there is no definite time frame for when a solution can be found placing an enormous risk these nations may be stuck with the dilemma for years to come.

The US & China agree to more stringent sanctions on North Korea

Early in January this year I wrote a piece on North Korea's threats to destabilize world peace and in particular the Asian region by detonating what it called a "Hydrogen Bomb" raising the alarm that it has capacity to direct attacks on certain nations, namely the US. This placed China in a tight diplomatic position as a close ally to respond accordingly that would remove doubt that China supports such actions.

China has hit back at dictator Kim Jong Un by agreeing to a string of sanctions that would come down hard on the communist state and suggest that China places greater priority to its place amongst the world's largest economy's than risk being cut off due to its association with it.
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