IMF chief warns against trade war

Gulf Times Business - - FRONT PAGE -

In­ter­na­tional Mon­e­tary Fund man­ag­ing direc­tor Chris­tine La­garde yes­ter­day warned coun­tries against en­gag­ing in trade and cur­rency wars that hurt global growth and im­peril “in­no­cent by­standers.”

For­mally launch­ing the IMF and World Bank an­nual meet­ings on the In­done­sian re­sort is­land of Bali, La­garde urged coun­tries to “de-es­ca­late” trade con­flicts and fix global trad­ing rules in­stead of aban­don­ing them.

The United States and China have slapped tit-for-tat tar­iffs on hun­dreds of bil­lions of dol­lars of each other’s goods over the past few months, rat­tling fi­nan­cial mar­kets as in­vestors worry that the es­ca­lat­ing trade con­flict could knock global trade and in­vest­ment.

The tar­iffs stem from the Trump ad­min­is­tra­tion’s de­mands that China make sweep­ing changes to its in­tel­lec­tual prop­erty prac­tices, rein in high­tech­nol­ogy in­dus­trial sub­si­dies, open its mar­kets to more for­eign com­pe­ti­tion and take steps to cut a $375bn US goods trade sur­plus.

Share mar­kets in Asia plunged to a 19-month low yes­ter­day af­ter Wall Street’s worst losses in eight months led to broader risk aver­sion, partly due to the heated global trade ten­sions as well as rapidly ris­ing dol­lar yields.

“We cer­tainly hope we don’t move in ei­ther di­rec­tion of a trade war or a cur­rency war.

It will be detri­men­tal on both ac­counts for all par­tic­i­pants,” La­garde told a news con­fer­ence. “And there would also be lots of in­no­cent by­standers,” in­clud­ing coun­tries that sup­ply commodities and com­po­nents to China, such as In­done­sia.

Fi­nance min­is­ters for de­vel­op­ing na­tions in the Group of 24 whose economies have been bat­tered by stormy mar­kets urged ma­jor economies to re­form the global trad­ing sys­tem, rather than dis­card it.

The G24 state­ment, is­sued on the side­lines of the meet­ings, said all emerg­ing mar­kets were “ad­versely af­fected” by ex­ces­sive cap­i­tal flow volatil­ity.

In re­cent weeks, US Trea­sury of­fi­cials have ex­pressed con­cerns about China’s weak­ened yuan as the depart­ment pre­pares its semi-an­nual re­port on cur­rency ma­nip­u­la­tion.

US Pres­i­dent Don­ald Trump has ac­cused China of de­lib­er­ately ma­nip­u­lat- ing its cur­rency to gain a trade ad­van­tage, claims Bei­jing has con­sis­tently re­jected. Trea­sury Sec­re­tary Steven Mnuchin met with Peo­ple’s Bank of China Gov­er­nor Yi Gang yes­ter­day on the side­lines of the IMF-World Bank meet­ing.

“We dis­cussed im­por­tant eco­nomic is­sues,” Mnuchin said of their meet­ing on Twit­ter. Yi, in a closed door meet­ing on Thurs­day with in­vest­ment of­fi­cials, ex­plained that China’s mon­e­tary pol­icy was on an op­po­site rate cy­cle to that of the United States, which is tight­en­ing mon­e­tary pol­icy due to a strong econ­omy, two peo­ple who at­tended the meet­ing said.

Over the week­end, the PBoC cut bank re­serve re­quire­ment ra­tios for a fourth time this year to ease credit con­di­tions and sup­port busi­nesses, in­clud­ing ex- porters hit by the US trade war. The PBoC did not im­me­di­ately re­spond to Reuters’ re­quest for com­ment on Yi’s re­marks. Yi also said China would con­tinue to open up its fi­nan­cial mar­kets, in­clud­ing to for­eign rat­ings agen­cies and bond in­vestors, the at­ten­dees said.

La­garde weighed into the cur­rency de­bate on Thurs­day and ap­peared to side with China, say­ing that yuan weak­ness against the dol­lar was driven by the green­back’s strength as the US Fed­eral Re­serve hikes in­ter­est rates.

Against a bas­ket of cur­ren­cies, the yuan has de­pre­ci­ated less.

“We have sup­ported the move of China to­wards (cur­rency) flex­i­bil­ity and we want to en­cour­age the au­thor­i­ties to con­tinue on this path,” she said. The yuan cur­rency lost over 8% be­tween March and Au­gust at the height of mar­ket wor­ries, though it has since pared losses as au­thor­i­ties stepped up sup­port mea­sures. La­garde said later that she be­lieved Chi­nese au­thor­i­ties were tak­ing steps to main­tain growth, sta­bil­ity and in­vestor con­fi­dence amid the trade con­flict, but faced a “complicated” balanc­ing act to keep its fis­cal sit­u­a­tion un­der con­trol.

World Bank Pres­i­dent Jim Yong Kim also warned against an es­ca­la­tion of the trade row, say­ing that if all coun­tries maxed out their trade threats, “We’d see a clear slow­down in the econ­omy and the im­pact on de­vel­op­ing coun­tries would be great. We’re work­ing with ev­ery sin­gle one of our coun­tries to pre­pare them in case it gets worse.” The IMF and Pak­istan yes­ter­day launched talks on a new bailout pro­gramme aimed at eas­ing a mount­ing balance of pay­ments cri­sis in the South Asian coun­try.

It would be Pak­istan’s 13th IMF fi­nanc­ing pro­gramme since 1988.

The IMF and World Bank meet­ings, at­tended by more than 19,000 del­e­gates, showed no sign of dis­rup­tion from an off­shore earthquake early yes­ter­day morn­ing be­tween Bali and Java is­land that killed three peo­ple.

Kim pledged World Bank sup­port for In­done­sia in the wake of a se­ries of earthquakes, in­clud­ing fi­nanc­ing sup­port for re­build­ing schools, hos­pi­tals, roads, hous­ing and other crit­i­cal as­sets.

IMF man­ag­ing direc­tor Chris­tine La­garde (3rd from right) at­tend­ing a meet­ing with Pak­istan Fi­nance Min­is­ter Asad Umar (3rd from left) at the Bali Con­ven­tion Cen­tre dur­ing the 2018 IMF-World Bank an­nual meet­ings in Nusa Dua on the In­done­sian re­sort is­land of Bali. La­garde yes­ter­day warned coun­tries against en­gag­ing in trade and cur­rency wars that hurt global growth and im­peril “in­no­cent by­standers.

Newspapers in English

Newspapers from Qatar

© PressReader. All rights reserved.