G-20 in Case You Missed It
G-20 leaders met over the weekend of April 23 in Washington D.C. - Some important takeaways:
In essence, the global economic stabilizing force during the first quarter of 2009 was China. Investors should understand that engine will continue to run smoothly. The Chinese clearly do not view their policy measures or asset prices as anything other than global contributors. They view economic risks as coming from developed nations. Do not expect the Chinese to slam on the brakes domestically and stall the global recovery. Rather, expect a mild "tap on the brakes" from time to time, if only to tease the developed world to attempt to catch up to the double digit growth out of China.
- First of all, most of the group is pushing aggressively for a rapid deployment of aid to resolve the Greek debt crisis. Even the Dutch, previously extremely resistant, are now positioning for a quick agreement. However, Angela Merkel wants more evidence of "credible austerity" before signing-off on a deal. On a comical note, Greek Finance Minister George Papaconstantinou finally arrived at his luxury Washington D.C. digs mid-way through the weekend.
- The G-20 did not issue an official communiqué regarding the China foreign exchange policy issue. China's central banker, Zhou Xiaochuan, was, of course, silent on the matter as well. Our Treasury Secretary Tim Geithner made brief comments on the Yuan expressing his belief that "it is in China's own interest to allow the currency to trade more freely."
- For investors, the most important development that would affect portfolio strategy comes from China's central banker Zhou Xiaochuan. His quote is: "China will keep its proactive fiscal policy measures and maintain its relatively easy monetary policy as the global economic recovery remains tentative." He went on to state the belief that "the outlook for the global economy faces many uncertainties."
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