China hosts the Group of 20 (G-20) meeting today, with the world's financial leaders likely to declare their readiness to act at the end of their summit if global economic conditions worsen, a European Union official has said.
This was as the International Monetary Fund (IMF) on Wednesday warned of risks of a "derailed recovery" and urged strong policy responses at both national and multilateral levels to "contain risks and propel the global economy to a more prosperous path".
United States Treasury Secretary Jacob Lew, however, dismissed the notion that things have reached crisis levels, while also saying that countries should not rely on the US too much as an engine of global growth, in an interview with Bloomberg TV.
China, as the world's No. 2 economy, is also expected to lead efforts in boosting global growth.
But first, China will need to restore confidence in its role as a global economic leader with clearer communication of its policies and strategies to G-20 members gathering in Shanghai, say observers.
Its task got tougher yesterday with the Shanghai Composite Index posting its biggest one-day loss in a month with a 6.41 per cent plunge, and the Shenzhen Composite Index losing 7.34 per cent, amid profit-taking and growth fears.
Professor John Kirton, co-director of the G-20 Research Group at the University of Toronto, said China's central goal is to send a message of confidence, in the wake of its dismal handling of domestic bourses and the weakening yuan amid a capital outflow.
"It will want to show it has a grip on resolving the stock market instability, that its currency volatility is under control with no intention for a substantial devaluation, and that it has a credible plan in generating growth in the global economy," Prof Kirton told The Straits Times.
The two-day G-20 conclave of finance ministers and central bankers is the first full ministerial-level meeting since China took over the group's rotating presidency last year. Other key events include a trade ministers' meeting in Shanghai in early July and the leaders' summit on Sept 4-5 in Hangzhou city.
Singapore Finance Minister Heng Swee Keat will be attending the meeting along with senior officials, the ministry said yesterday.
Top of the agenda is stronger policy coordination among G-20 members to prevent negative spillovers and to avoid competitive currency devaluation and protectionism.
Apart from the IMF's urging of a coordinated stimulus programme, there have been calls for a one-off devaluation of the yuan by China to stem its fall and for G-20 members to agree to jointly intervene in the foreign exchange market, similar to the 1985 Plaza Accord that had then reversed a destabilising spike in the US dollar. Both calls have been dismissed by Chinese officials.
Mr Daniel Rosen, a partner at economic research firm Rhodium Group, said Beijing is unlikely to pursue a major yuan devaluation as "it would trigger follow-on devaluations by other nations and leave everyone worse off rather than conferring any benefit on China".
Dr Tristam Sainsbury of the Lowy Institute in Sydney does not expect G-20 members to act on currency intervention, saying: "This meeting will probably stick to the well-established script for global currency tensions... and on the clear communication of well- calibrated policies."