BEIJING (Reuters) – Global coordination is important as the world economy undergoes changes, including the latest increase in U.S. interest rates earlier this month, China’s Vice Finance Minister Zhu Guangyao said ahead of a G20 summit of leaders in July.
As the global economy stabilises, major countries need to normalise their interest rates, although this is happening at a very slow pace, Zhu told reporters in Beijing on Thursday.
“We need to closely monitor how the normalisation of interest rates in major economies will impact global capital markets,” said Zhu.
The U.S. Federal Reserve has raised interest rates four times as part of a normalization of monetary policy that began in December 2015. The central bank had pushed rates to near zero in response to the financial crisis a decade ago.
Zhu said the new global macroeconomic environment makes it even more important for global coordination through channels like the G20, which will convene in Hamburg next month.
Earlier this week, the Bank for International Settlements (BIS), an umbrella body for leading central banks, said in one of its most upbeat annual reports for years that major central banks should press ahead with interest rate increases.
Policymakers should take advantage of the improving economic outlook and its surprisingly negligible effect on inflation to accelerate the “great unwinding” of quantitative easing programmes and record low interest rates, the BIS said.
The Chinese central bank guided market interest rates higher in the first quarter, including immediately after a Fed rate hike in March. The move was partly an effort to counter pressure on the yuan from capital outflows, analysts say.
The People’s Bank of China last adjusted its policy rates in October 2015.
Efforts to rein in North Korea’s nuclear and missile programmes are likely to be a focus in bilateral meetings President Xi Jinping might hold during the G20.
Asked if Xi would meet U.S. President Donald Trump, South Korean President Moon Jae-in, or Japan’s Prime Minister Shinzo Abe at the summit, Vice Foreign Minister Li Baodong said schedules were still being arranged.
Li reiterated that China wants to resolve the situation on the Korean peninsula through dialogue.
Trump is growing increasingly frustrated with China over its inaction on North Korea, according to senior U.S. administration officials, though Beijing has repeatedly said its influence over Pyongyang is limited and that it is doing all it can.
(Reporting by Sue-Lin Wong and Michael Martina; Writing by Ryan Woo; Editing by Michael Perry)