WASHINGTON -- While markets are calmer and China's economic problems look more manageable, top finance officials are struggling to deal with a fragile global recovery. Growth is too anemic to alleviate the problem of stagnant wages.
U.S. Treasury Secretary Jacob Lew on Saturday warned countries to avoid manipulating their currencies to boost trade and instead urged countries running large trade surpluses to boost spending to bolster global demand. But German Finance Minister Wolfgang Schaeuble warned that the uncertainty in financial markets called for a "high degree of caution" and control of government spending.
The debate was occurring as global finance officials wrapped up three days of talks in Washington with meetings of the steering committees of the 189-nation International Monetary Fund and its sister lending organization, the World Bank.
"Policymakers need to work together to ensure that weakness in global growth does not become entrenched," Lew said in remarks to the IMF panel. "It remains imperative that countries around the world use all available policy tools to support growth and job creation."
Lew said at a time of "slow and uneven global growth, avoiding beggar-thy-neighbour exchange rate policies" would be particularly important. The United States has in the past worried about currency manipulation by China and Japan to boost their exports.
Schaeuble in his comments to the IMF said Germany intended to stick to its plans for a balanced budget, warning that rising budget deficits can harm overall growth.
"Given the higher degree of uncertainty in the global economy and taking into account the extraordinary circumstances in financial markets, fiscal policies need a high degree of caution and expenditure control," Shaueble told the IMF panel.
Finance ministers and central bankers from the Group of 20 major economies emerged from their meeting, also in Washington, on Friday relieved that financial markets had recovered from that turbulence.
"I came away feeling a little more encouraged than when I arrived," Bank of Canada Governor Stephen Poloz told reporters.
Early this year, world markets were being rattled by a drop in the Chinese currency and by tumbling oil prices, both of which seemed to signal deep troubles for the global economy.
Since then, the yuan and oil prices have stabilized, and China on Friday said its economy registered solid 6.7 per cent growth the first three months of 2016.
The respite from market tumult does not mean all is well with the world economy.
The IMF on Tuesday downgraded its outlook for the global economy this year and issued a list of risks that could make things worse: Conflict in the Middle East. A refugee crisis in Europe. The possibility that British voters will decide in June to pull their country out of the European Union. A growing political backlash in the United States and Europe against international trade.
Japanese Finance Minister Taro Aso said that the world's financial markets are starting to regain "composure" but "downside risk" persists. He expressed particular concern about risks from volatility in capital flows and foreign exchange rates.
Japan is concerned about the value of the yen, which has risen rapidly this year against the dollar despite an unusual move by the Bank of Japan in February to introduce negative interest rates in an unsuccessful effort to spur flagging growth and keep the yen low to boost exports.
Even China's solid first-quarter numbers raised fears the Chinese government is backsliding on commitments to reform its economy. Critics worry it pumped up the first-quarter numbers by investing heavily in inefficient state-owned companies -- an approach that could drag down growth in the long term.
Global finance officials are seeking to address the political backlash against globalization, which has helped propel the presidential campaign of Republican front-runner Donald Trump in the United States and a campaign in Britain to leave the EU.
In a statement Friday, the G-20 pledged to pursue policies that will bolster growth and further stabilize financial markets, but they offered no new measures to accomplish these goals.
The IMF is urging countries to launch a new round of public works projects to improve roads and other types of infrastructure in hopes the higher government spending will boost growth. But in an era of high budget deficits, that call has not met with much support. In Friday's communique, the G-20 did not offer any new proposals on infrastructure spending.
The G-20 statement repeated a goal to increase transparency of all countries on tax matters -- an issue that taken on urgency following the recent release of the Panama Papers showing the widespread use of tax havens by the world' rich and powerful.
Associated Press writers Maria Danilova and Matthew Pennington contributed to this report.
