IMF boss warns against trade, cur­rency wars

Shanghai Daily - - BUSINESS - (AP)

THE head of IMF ap­pealed yes­ter­day to the US and China to cool their dis­pute over tech­nol­ogy pol­icy and play by world trade rules, as tum­bling share prices drove home po­ten­tial per­ils from a clash be­tween the world’s two big­gest economies.

Global eco­nomic growth is slow­ing but re­mains strong, Chris­tine La­garde, manag­ing di­rec­tor of the In­ter­na­tional Mone­tary Fund, said on the side­lines of the IMF-World Bank an­nual meet­ing, be­ing held this week on the In­done­sian is­land of Bali.

Coun­tries are mostly in a “strong po­si­tion,” she said, “which is why we be­lieve we are not see­ing what is re­ferred to as ‘con­ta­gion.’”

But the gy­ra­tions that rocked Wall Street the day be­fore and Asia and Europe yes­ter­day, tak­ing the Shang­hai Com­pos­ite in­dex down 5.22 per­cent and Ja­pan’s Nikkei 225 nearly 4 per­cent, do partly re­flect ris­ing in­ter­est rates in the US and some other coun­tries and grow­ing un­cer­tainty over trade, she said.

“It’s the com­bi­na­tion of the two that is prob­a­bly show­ing some of the ten­sions that we see in terms of in­dices, short-term in­di­ca­tors as well as pos­si­bly mar­ket vo­latil­ity,” La­garde said.

The US and Chi­nese ex­changes of penalty tar­iffs in their dis­pute isn’t help­ing, she said.

Her ad­vice was three­fold: “De-es­ca­late. Fix the sys­tem. Don’t break it.”

She ac­knowl­edged that the World Trade Or­ga­ni­za­tion, based in Geneva, has made scant head­way in re­cent years to­ward a global agree­ment on trade rules that can ad­dress is­sues like com­plaints over Chi­nese poli­cies US Pres­i­dent Don­ald Trump says un­fairly ex­tract ad­vanced tech­nolo­gies and put for­eign com­pa­nies at a dis­ad­van­tage in a quest to dom­i­nate cer­tain in­dus­tries.

“Our strong rec­om­men­da­tion is to es­ca­late work for a world trade sys­tem that is stronger, that is fairer and is fit for the pur­pose,” she said in open­ing re­marks.

Some­what obliquely, she said poli­cies aimed to­ward an ex­ces­sively “dom­i­nant po­si­tion” were not com­pat­i­ble with free and fair trade.

The IMF has down­graded its fore­cast for global eco­nomic growth to 3.7 per­cent this year from its ear­lier es­ti­mate of 3.9 per­cent.

It also is­sued re­ports this week on gov­ern­ment fi­nance and fi­nan­cial sta­bil­ity that warn of the risks of dis­rup­tions to world trade.

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