RPT-GLOBAL ECONOMY-Semblance of stability as world financial leaders meet

(Repeats from Sunday Oct 7)

* US to feel pressure over fiscal cliff at IMF/G7 meetings

* China, U.S. data mildly positive; IMF to cut growthestimates

* Talks to revolve around fiscal stimulus, risk reduction By Vidya Ranganathan

SINGAPORE, Oct 7 (Reuters) - When finance officials from theworld's leading economies meet this week, it is against thebackdrop of a global economy that shows a glint of stability,with a deluge of Chinese data due in the coming days at bestexpected to confirm that.

Although investors realise this meeting of top economicchiefs -- the Group of Seven finance ministers, InternationalMonetary Fund and World Bank -- in Tokyo cannot possibly producequick fixes for euro zone's debt crisis or the approaching U.S.fiscal contraction, or even extract stimulus pledges from China,the pressure on governments to do more is intense.

Deputy finance ministers and central bankers from theleading economies have already warned that the raft ofconventional and unconventional policy actions by monetaryauthorities can only buy the world economy some time, and thatit is up to governments to boost demand and create jobs.

Fortunately for them, the economic data in the run up to theweek-long meetings has been slightly encouraging.

Besides a headline-grabbing drop in the September U.S.jobless rate to its lowest in nearly 4 years, at 7.8 percent,there was enough evidence in manufacturing surveys in China andthe United States to suggest the world's two biggest economiesmight have passed a bottom in the third quarter, even if thepromise of improvement was missing.

This week's data on loan growth at Chinese banks shouldoffer a glimpse into whether Beijing's gentle easing and go-slowencouragement of infrastructure investments are working.

It is also the week that the euro zone's permanent500-billion-euro bailout fund, the European Stability Mechanism(ESM), is launched.

But the spotlight is on the IMF/World Bank annual autumnmeetings in Tokyo, where both the United States and Europe maybe put on the defensive.

Euro zone officials will explain what they have done so farto deal with their problems, according to a paper they haveprepared for a meeting with their G7 colleagues from Canada,Japan and the United States. They will also point a finger atWashington as a potential source of economic stress.

"In particular, the U.S. needs to agree by the end of theyear on how to deal with the 'fiscal cliff' and, at the sametime, adopt a credible fiscal consolidation plan," the documentsaid.

The unease over both the impending huge package of U.S.spending cuts and tax increases that take effect in January andthe presidential election in November, has been growing, almosteclipsing the confidence inspired by the Federal Reserve's newopen-ended debt purchase plans.

But the bickering between European leaders and the IMF overa Greece bailout, mainly over the IMF insistence that Europeangovernments restructure the Greek debt they hold, is by no meansgoing to be a side-show at the IMF's 2012 annual meeting.

Japan, meanwhile, is bringing the issue of its risingcurrency, and the pressure the high yen puts on an economythat's on the verge of recession, to the G7 dinner table.


The challenges to a broad-based global recovery will remainthe overriding theme at the G7 meeting, and the week brings therelease of some sombre forecasts by the IMF.

A German newspaper reported the IMF will cut its forecastsfor global economic growth to 3.3 percent this year and 3.6percent in 2013 from earlier forecasts of 3.4 percent and 3.9percent respectively.

According to the paper, the IMF is also expected to warn ofa significant increase in downside risks and say the growthoutlook depended on "whether decisive political steps tostabilise confidence are taken in the euro zone and U.S.".

The World Bank has done its bit to highlight how vulnerableeconomies in Asia are. It said growth in east Asia and thePacific will slow by a full percentage point in 2012 to 7.2percent, but domestic demand will help a rebound next year.

The message was similarly and consistently bearish in theAustralian central bank's statement after a surprise interestrate cut last week, as they could be in data this week.

Singapore, a bellwether of Asian openness to global demand,may have slipped into a technical recession in the thirdquarter, and euro zone industrial production data will befurther confirmation of a protracted contraction in that region.

"It shouldn't be an exciting quarter," said Bank ofSingapore chief economist Richard Jerram. "There is no reason tobe expecting the data to deteriorate. At the same time, theremight be some degree of improvement in the data, but nothingdramatic."


The bulk of data on China's third-quarter growth, andSeptember data on trade and industrial production isn't due foranother week, and shouldn't be much of a surprise either.

China's economy expanded 7.6 percent from a year earlier inthe second quarter, the slowest pace in three years. The thirdquarter was possibly worse, at 7.4 percent, as per a Reuterspoll.

But this week's data on money supply and bank loans is inmany ways of greater consequence for China watchers keen to seeif the central bank's open market operations and thegovernment's bringing forward of infrastructure projects show upin loan growth.

Investors have been persistently disappointed by the absenceof stimulus this year from a government with rather largepockets and ahead of the Communist Party's once-in-a-decadeleadership transition.

Yet they know China is keen to avoid a repeat of the creditbinge that followed the 2008 markets' crash, whose after-effectshave left the economy overly reliant on investment and saddledits banks with bad loans.

Economists polled by Reuters estimate China's banks issued650 billion yuan of new loans in September. Other data showedthe issuance of medium and longer term bonds slowed last month.

"Overall, there are no clear signs that credit supply haspicked up strongly in September, which is necessary tojump-start the investments and growth," said Citibank strategistHe Weisheng. "This means growth will remain weak in Q4."

(Vidya Ranganathan; edited by Clive McKeef)