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Stability, growth, jobs = $1 trillion

By Bao Daozu (China Daily)
Updated: 2009-04-03 07:38

President Hu Jintao and other world leaders take part in a group photo session at the G20 summit in London yesterday. [Agencies]

The Group of 20 leaders yesterday pledged an additional $1.1 trillion to restore credit, growth and jobs in the world economy, announcing a broad raft of measures designed to hasten the end of the global financial crisis.

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They also declared a crackdown on tax havens, regulation of hedge funds and a new supervisory body to flag problems in the world financial system.

The host, British Prime Minister Gordon Brown, said:"Today, the largest countries of the world have agreed on a global plan for economic recovery and reform."

The US stock market reacted positively, with investors sending the Dow Jones industrials above the 8,000 mark yesterday for the first time in nearly two months.

All the major indices were trading at more than 3.5 percent at mid-day with optimism that the country's economy was on the mend.

In London, the FTSE 100 index of leading British shares closed more than 4 percent higher following the announcement of the summit deal.

In a sweeping G20 communique, the world leaders vowed to join hands to spur the global economy, repair the financial system, strengthen global financial regulation, battle trade protectionism and achieve green and sustainable recovery.

They promised "an unprecedented and concerted fiscal expansion" to create jobs, raise output by 4 percent and push for the world's shift to a green economy, according to the Leaders' Statement released at the end of the G20 London Summit.

They agreed to triple the IMF resources to $750 billion, which coupled with new special drawing rights, additional lending and guarantees for trade finance, will provide the world with an additional $1.1 trillion program to "restore credit, growth and jobs" in the world economy.

China has pledged to extend $40 billion to enlarge IMF resources, Brown said at the press conference immediately after the leaders signed the statement.

To strengthen financial supervision and regulation, the leaders agreed to establish a new "financial stability board" (FSB) with a strengthened mandate, as a successor to the existing financial stability forum (FSF), joined by all G20 members. FSB will collaborate with the IMF to provide early warnings of macroeconomic and financial risks and the actions needed to address them.

 

"This is the day the world came together to fight back against the global recession. Not with words but a plan for global recovery and for reform and with a clear timetable," Brown said.

The leaders also set principles to reform the international banking system.

"This is a comprehensive program of measures that includes, for the first time, bringing the shadow banking system, including hedge funds, within the global regulatory net," he said.

The leaders expressed their commitment to reaching an ambitious and balanced conclusion to the Doha Development Round, to give the global economy an estimated boost of $150 billion a year, the statement said.

They also pledged to "lay the foundation for a fair and sustainable world economy" and help the poorest countries achieve the millennium development goals.

China's role

During the plenary session yesterday morning, President Hu Jintao highlighted China's proactive polices in stimulating its economy while supporting a joint effort to not only bring the world out of the economic downturn, but also create a roadmap for reform in the international financial system.

He said the "most pressing task in countering the global financial crisis is to restore economic growth and prevent a severe recession".

"Every effort should be made to oppose all forms of protectionism, maintain an open and free environment for trade and investment, speed up reform and reshape the international financial order," Hu told other leaders attending the summit.

China's efforts to boost its own growth and its increasing role in shaping the future of the world monetary system were widely acknowledged.

John Lipsky, first deputy managing director of the International Monetary Fund, said "China is a big country and will play an ever bigger role in the world".

Dr Paola Subacchi, research director at London think tank Chatham House, said her impression last year before the G20 Washington Summit was that "China was keeping itself in a detached position".

"I think now China is more involved. Over the last two weeks, we see China becoming involved in the process," Subacchi said.

AP contributed to the story