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The 8th Finance and Central Bank Deputies Meeting of the Manila Framework Group (Mar.28-29,2001)

The 8th Finance and Central Bank Deputies Meeting of the Manila Framework Group
March 28th-29th, 2001
Beijing, P. R. China

Chairman's Summary

 

1.The eighth Manila Framework Group meeting was held on 28-29 March in Beijing, P. R. China. Finance and Central Bank Deputies from 14 member economies1 and senior representatives from the International Monetary Fund (IMF), the World Bank (WB), the Asian Development Bank (ADB) and the Bank for International Settlements (BIS) attended.

 

2.Deputies considered the implications of the slowdown in global economic growth from the rapid rate recorded in 2000. While it was hoped that the slowdown in global growth would be moderate, they recognized that there were downside risks to this outlook. All member economies would need to be vigilant to these risks and set policy accordingly.

 

3.Deputies welcomed recent monetary policy adjustments, including interest rate reductions, in the United States and Japan. While a soft landing in the U.S. and a moderate growth in Japan are the expected outturn, downside risks remain. Deputies noted the importance of monitoring the economic activities closely and welcomed the statement that they continuously take appropriate policy actions to minimize these downside risks. Deputies noted that sustainable growth of these economies is particularly important for global and regional economic developments.

 

4.The prospects for many of the emerging market economies in the region depend, to a large extent, on the evolving global economic developments. This reflects the importance of both international trade and capital flows to the region. Deputies acknowledged the ongoing progress in structural reforms in these economies. However, deputies underscored the need for further progress in these reforms to promote a sustainable recovery in domestic demand, particularly in view of the weakening of external demand.

 

5.Deputies discussed the interaction between equity markets and macroeconomic developments. They noted that the recent equity market weakness may have significant impacts on growth. Moreover, some observed that high correlation across global equity markets and development in the information technology sector had resulted in higher market volatility with possible implications for capital flows to the region. Deputies also discussed the issue of how asset bubbles can impact on the economy. In reviewing these developments, deputies noted the importance of efforts to further strengthen financial sectors and enhance their resilience to potential shocks.

 

6.Deputies exchanged views and experiences in the restructuring of financial and corporate sectors, including the resolution of non-performing loans, the re-capitalization of financial institutions, the operation of asset management companies, the strengthening of banking supervision, and financial and operational restructuring of weak corporates. They underscored the essential role of financial and corporate restructuring and reforms in securing sustainable economic growth and agreed on the need for further efforts in these areas.

 

7.Deputies noted the progress made in strengthening the international financial system. They reviewed the progress in several initiatives, including streamlining of IMF facilities, strengthening of IMF surveillance, standards and codes, financial sector assessment, private sector involvement, and discussion on IMF quotas, on which they had previously expressed views. They noted the importance of wide participation in the development of international standards and codes, whose broad implementation is expected to be conducive to the financial stability. They also noted the emergence of regional arrangements to complement those at the international level. They exchanged views on work in various international fora in strengthening the international financial system, including the work of the IMF, the G-20, the Financial Stability Forum and its working groups.

 

8.Deputies reviewed the role of cooperative financing arrangement under the Manila Framework against the background of the experience of the last few years, and reforms to the international financial system. They recognized that the adequacy of financing facilities for the region has been greatly improved with the enhanced IMF facilities, including the Supplemental Reserve Facility (SRF), Contingency Credit Line (CCL), the increase in IMF quotas, and the development of complementary regional financing arrangements. They agreed to continue discussions on the possible modalities of a MFG financing arrangement through establishing a task force.

 

9.Deputies discussed the role and activities of the Manila Framework Group Meeting. Deputies agreed that the Manila Framework Group had proved a useful forum for regional cooperation and surveillance, sharing views on major policy issues. In addition, the Group noted the role of the MFG in helping to shape the reform of international financial system. Deputies agreed to maintain this function of the group and to avoid duplicating the activities of other regional groups.

 

10.Deputies agreed to hold the next Manila Framework Group meeting in New Zealand.

 

11.Deputies thanked the Chinese Government for its warm hospitality and successful arrangements for the meeting.

1The 14 member economies of Manila Framework Group are Australia, Brunei Darussalam, Canada, China, Hong Kong SAR, Indonesia, Japan, Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand and the United States of America.