‘Protectionist spiral undermines growth’

China vows to open markets

The world economy must avoid being sucked into a protectionist spiral that undermines the momentum of global growth, IMF managing director Christine Lagarde said.

washington — The world economy must avoid being sucked into a protectionist spiral that undermines the momentum of global growth, International Monetary Fund (IMF) managing director Christine Lagarde said.

The IMF remains optimistic about global growth prospects, Lagarde said on Wednesday in a speech in Hong Kong ahead of next week’s annual spring meetings of the fund’s 189 member nations in Washington. The world economy is benefiting from surging investment, rebounding trade and favorable financial conditions, all of which are encouraging companies and households to step up spending, Lagarde said.

The IMF will update its global forecast April 17. The fund said in January it expects the global economy to grow 3.9 per cent this year and next.

Still, Lagarde warned that threats loom, most notably a surge in protectionism. “Yes, the current global picture is bright. But we can see darker clouds looming.” Lagarde said the rise of the global trading system reduced extreme poverty, cut living costs and created millions of high-paying jobs.

Increasing trade and removing barriers, encouraging level playing field to which everybody should contribute has to be done collectively Christine Lagarde, MD, IMF

“But that system of rules and shared responsibility is now in danger of being torn apart,” she said. “This would be an inexcusable, collective policy failure.”

The IMF’s warning comes as the US and China engage in a war of words over trade that has unsettled financial markets and raised doubts about the broadest global growth surge in years.

President Donald Trump has threatened to impose tariffs on $150 billion in Chinese imports to punish Beijing for what the US sees as abuse of its intellectualproperty rights.

China has responded by threatening to slap tariffs on everything from American soybeans to planes.

Fears of a trade war between the world’s two biggest economies will loom large next week as finance ministers and central bankers from IMF member countries meet in Washington. The fund was conceived during the Second World War to promote open markets and discourage the “beggar-thy-neighbor” policies that took root during the Great Depression.

Without referring directly to the US or China, Lagarde warned that import restrictions hurt everyone, especially poor consumers. Such barriers prevent trade from playing its “essential” role in boosting productivity and diffusing new technologies, she said. — Bloomberg Shanghai — China said on Wednesday it would further open its financial markets in the latest apparent attempt to cool economic tensions with the US, as IMF chief Christine Lagarde warned the world trade system was in danger of being “torn apart” by protectionism.

China’s securities regulator said foreign investors would be able to buy more Chinese stocks through existing programmes linking Hong Kong’s bourse with mainland exchanges, and that it will also “strive” to establish a similar link between Shanghai and London this year.

Central Bank Governor Yi Gang, speaking at the Boao Forum for Asia on the southern Chinese resort island of Hainan, also said Beijing would fasttrack previously announced plans to remove limits on foreign shareholdings in Chinese financial institutions.

Foreign firms will be allowed to own as much as 51 per cent of joint ventures in the securities, funds and futures industries, up from the current 49 per cent. — AFP