China calls on US, Japan to fix their finances

JAPAN: China said Saturday the failure by Washington and Tokyo to fix their fiscal problems was hurting the global economy, as it called for “bold, swift and decisive action” to reverse a slowdown.

Deputy central bank governor Yi Gang warned the absence of a “credible, medium-term fiscal consolidation in some of the major advanced economies such as the United States and Japan” is unsettling for the world economy.“Uncertainties related to fiscal sustainability weigh on sentiment and confidence, negatively affecting consumption, investment, and hiring decisions,” Yi said in a statement to a key International Monetary Fund committee.

“The slow recovery in these major advanced economies poses costly spillover effects to the rest of the world,” he added.

Yi said it “remained to be seen” whether monetary easing measures touted by central banks as an elixir for growth would live up to their billing. “The slowing global recovery suggests that fundamental constraints to economic growth and financial stability remain unresolved,” he said. “The need for bold, swift, and decisive action to arrest the global slowdown and preserve financial stability is more urgent than ever.” The statement credited Europe for efforts to fix its debilitating debt crisis, calling it a step in “the right direction”, but added that policymakers must follow through on promised reforms.

“A durable solution to the Euro area crisis would provide a much-needed boost to global recovery,” the statement said. On the domestic front, Yi said the Chinese economy would expand “steadily” through the second half of 2012 and keep its “relatively strong momentum in the medium and long term”.

AFP