India backed a proposal at the G20 Finance Track calling on countries with excessive and persistent external surpluses to address domestic distortions that constrain consumption and fuel an overreliance on exports for growth.
However, G20 members failed to reach a joint statement after China opposed the proposal, contending with the Chair’s statement.
“We recognise that excessive and persistent imbalances pose risks and can generate economic distortions and adverse cross-border spillovers that hinder growth, drive and exacerbate imbalances in other countries, heighten economic and supply chain vulnerabilities, and reduce resiliency. These detrimental effects can contribute to economic tensions and potential risks of disorderly adjustment, including through the financial channel,” the Chair’s statement said.
India, which has a trade deficit of over $100 billion with China, supported the G20 proposal.
“The US presidency has spoken about growth as a priority. It has spoken about global imbalances as a concern. The US has also very clearly placed high importance on financial literacy. In all these, we are very much with the US. These are the points on which we want fair and open discussion. Growth is the central point for the G20 finance track. Equally, the global imbalances will have to be sorted out. Therefore, I appreciate the US presidency in taking up these points,” finance minister Nirmala Sitharaman said in North Carolina on Tuesday.
The US has been increasingly critical of China’s large trade surplus and what it describes as non-market policies that contribute to global overcapacity and export dependence.
China on Wednesday said it “deeply regrets” that the finance ministers’ meeting failed to issue a joint statement, while its central bank governor defended Beijing’s position that it does not deliberately pursue trade surpluses.
The Chair’s statement said countries should take steps to eliminate non-market policies and practices that exacerbate imbalances.
“In particular, countries with excessive and persistent external surpluses should remove distortions that constrain domestic consumption and that result in an overreliance on exports for growth. These policies and practices result in harmful spillovers to global, regional, and domestic markets and increase economic dependency,” it said.
On surveillance, the G20 said it would rely on the International Monetary Fund’s (IMF’s) mandate to monitor global imbalances and welcomed work to strengthen the “consistency and evenhandedness” of IMF surveillance of the macroeconomic drivers of imbalances, including distortive policies and their outward and inward spillovers.
The group also asked the IMF to provide “more granular scenario analysis, including the costs of inaction,” while calling on the IMF and OECD to improve data needed to analyse global imbalances, including coverage of non-market policies and practices.
The statement separately endorsed the US presidency’s emphasis on growth, saying “advancing growth is a key priority across our economies” and identifying regulatory and administrative burdens, inefficient tax regimes, inadequate investment, high capital costs and weaknesses in labour supply, skills and mobility as significant impediments to robust growth.
On financial literacy, another US priority backed by India, the G20 said it “acknowledged that financial literacy is foundational to financial health and well-being.”
It committed to scaling up national financial education efforts and promoting evidence-based practices to improve financial decision-making. The US Treasury said the statement was agreed by all G20 members present except China, which objected to paragraphs 4, 10, 11 and 13. Thus, while 19 members backed the substantive language on global imbalances, China prevented the document from being presented as a consensus G20 communique.
