(Recasts lead, updates throughout with more comments)
OTTAWA -(Dow Jones)- Canadian Finance Minister, Jim Flaherty, on Sunday welcomed China's four trillion yuan economic stimulus plan and said he expects other large emerging economies to follow suit, actions which he said would help bolster flagging global growth.
Flaherty said China's move isn't a surprise. He said he had talked with leaders of the Chinese delegation at the Group of 20 finance ministers meeting in Sao Paulo, Brazil, and also at the APEC meeting in Trujillo, Peru, before that.
"They are seeing, as are the other emerging economies, some reduction in their anticipated economic growth. So it would not be surprising to see not only China but also some of the other large emerging economies taking steps to stimulate their economies," Flaherty told reporters on a conference call from Sao Paulo after the G20 finance ministers meeting.
He said China's action would help boost global growth, and help Canada by creating demand for commodities.
"That's good for the world economy, it helps create additional demand, and it's good for the Canadian economy given our role in the provision of commodities, which is substantial," he said.
Flaherty said the economic slowdown was so significant "that even the passing of one month creates reduced expectations in terms of economic growth."
The International Monetary Fund on Thursday slashed growth forecasts for the G7 and world economies for this year and next. The IMF now expects the global economy to grow 2.2% in 2009 from the 3% projected last month. Growth for this year was marked down to 3.7% from 3.9%.
Flaherty said G20 ministers had a "frank and constructive" discussion about what caused the financial crisis and solutions to bring back stability to markets.
He said Canada proposed a five-step plan, including regulation of all pools of capital that rely on leverage, and capital and liquidity buffers that are large enough to handle major shocks. As well, he said international coordination, review and surveillance of financial systems must be stronger and have more "bite" to create a second line of defense.
Exit Strategy
Flaherty urged countries to resist protectionist measures. He said it was ineffective regulation and not globalization that led to the crisis.
He said good regulation starts at home and it's up to all countries to straighten their own financial regulatory systems.
He said Canada has taken measures to protect the stability of its financial system and boost credit markets while avoiding putting taxpayers money at risk. He said the government will take more steps if necessary.
"We are prepared to take further actions if needed, a testament to the belief that a strong global response must begin at home," he said.
Flaherty said Canada's experience during the crisis shows that a market-based approach combined with an effective regulatory regime, "provides a balance of growth and stability so much in need today."
He pointed out that the World Economic Forum had rated the Canadian financial system the soundest in the world. Capital requirements for Canadian financial institutions are higher than international standards and better than in other countries.
But Flaherty said the scale of the financial crisis is unprecedented, and Canada will ensure its financial system isn't harmed.
"We must remain steadfast in doing whatever is necessary to prevent our financial system from being put in harm's way by global events," he said.
He said the growing list of countries that inject capital into their financial institutions using public funds need to have an exit strategy because such actions give them an unfair advantage over Canada. He expects G20 leaders to discuss the issue at their summit in Washington Nov. 15.
Flaherty also said he expects Prime Minister Stephen Harper to push the need for a common securities regulator in Canada at a meeting on the economy with provincial premiers Monday.
"Certainly the move internationally, the move globally, is toward as much uniformity as we can have in regulation of financial markets," he said.
Harper's message to premiers will be for the need for governments to have "realistic and stable in economic policies", Flaherty said. Harper is also expected to discuss the need to speed up infrastructure investment.
-By Nirmala Menon, Dow Jones Newswires; 613-237-0668; nirmala.menon@dowjones.com
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(END) Dow Jones Newswires
November 09, 2008 14:54 ET (19:54 GMT)

Publié le 09 novembre 2008 Copyright © 2008 Dowjones