Friday, May 8, 2009

China vice premier says world economy to worsen

LONDON (Reuters) - China's vice premier Wang Qishan said the global financial crisis is spreading and the economy will get worse before it gets better, in a written article in the Financial Times on Friday.

He said financial stability would be aided by keeping exchange rates of major currencies stable through exchange rate policy coordination.

He also rejected protectionism, saying "it is vital unequivocally to reject protectionism of all kinds."

"The global financial crisis is still spreading," he wrote.

"The world economy is going to get worse before it gets better, and the situation remains serious."

In an article that drew on the significance of British-China relations, he called for both countries -- as important members of the G20 group of leading nations -- to work together to implement the consensus reached at the Washington and London summits.

Wang also said it was imperative that countries which had worked closely since the crisis began coordinated their macroeconomic policies and that they adopted stimulus, fiscal and monetary policies.

Wang said China will continue with its "proactive fiscal policy and moderately easy monetary policy to ensure sound and steady growth of our economy, and in so doing contribute to the recovery of the global economy."

"China's huge stimulus package has now produced initial results," he wrote.

"There has occurred positive change in our economy and things are better than previously expected."

He called for a strengthening of global regulation, on the basis of sovereign rules, cooperation in regulating private capital flows, financial institutions and markets, products and intermediaries, and said it was important to improve the basic financial system.

He wrote that a global financial risk early-warning system should be established as soon as possible, and it was important to increase emergency assistance for those developing countries that had been hard-hit by the crisis.

Wang said reform of international financial institutions such as the International Monetary Fund, World Bank and the Financial Stability Board to provide more representation for developing nations and to make sure that the decision-making process is "transparent, fair and just."

(Reporting by Avril Ormsby; Editing by Bernard Orr & Kim Coghill)

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