Business

G20 finance chiefs voice concerns over downside risks to world economy

by Ko Hirano

Kyodo

Finance chiefs from the Group of 20 major economies on Thursday shared concerns about growing downside risks to an otherwise stable global economy.

Summing up discussions among G20 finance ministers and senior officials over dinner in Buenos Aires, Finance Minister Taro Aso said, “The world economy is basically stable, but there are many uncertainties in the outlook, an example of which is (the slowdown of) China.”

Speaking to reporters after the meeting, Aso said the G20 officials did not specifically touch on simmering trade tensions between Washington and Beijing, partly because U.S. Treasury Secretary Steven Mnuchin was absent from the meeting.

Along with disputes between the world’s two largest economies, a source from the Japanese delegation cited excessive levels of debt incurred by China and other emerging economies as another risk factor to world economic growth.

The source said the G20 officials did not discuss foreign exchange.

Aso said he told his G20 peers that “free and fair” rules in trade and other economic activities are the basis for growth. He called part of China’s economic policy unfair, without elaborating.

The meeting came ahead of the two-day G20 summit from Friday in Argentina’s capital, an event that will bring together Prime Minister Shinzo Abe, U.S. President Donald Trump, Chinese President Xi Jinping and other world leaders.

Trump and Xi are scheduled to meet bilaterally Saturday as other countries watch to see whether they will agree to de-escalate the U.S.-China tariff war.

The U.S. leader has threatened to impose tariffs on all Chinese imports if he and Xi fail to strike a deal in the coming talks. Trump also threatened to raise tariffs on Chinese automobiles to 40 percent from the current 27.5 percent.

So far, Washington has slapped tariffs on $250 billion in Chinese imports — or about half of the goods it imports from China each year — in response to Beijing’s alleged intellectual property and technology theft.

Quoting U.S. and Chinese officials, the Wall Street Journal reported Thursday that the two sides are considering launching new talks looking at “big changes” in Chinese economic policy in exchange for the Trump administration holding off on further tariffs through the spring.

The discussion would focus on many issues the United States has pushed China to address, including intellectual property protection, forced technology transfer, subsidies to state-owned enterprises, and even nontrade issues such as cyberspying, the paper said.

But it is not known whether Trump will approve of such a deal, which is intended to defuse tensions and boost financial markets.

Economists have expressed concern about negative impacts stemming from trade tensions and the associated rise in policy uncertainty in the world economy, saying these factors could dent investor sentiment, trigger financial market volatility, and slow investment and trade.

On Nov. 21, the Organisation for Economic Cooperation and Development lowered its forecast for global growth next year, and said, “Trade growth and investment have been slackening on the back of tariff hikes.”

Global gross domestic product is now expected to grow a real 3.5 percent in 2019, down from the OECD’s May projection of 3.7 percent.

The Paris-based institution pointed out other downside risks, saying higher U.S. interest rates and an appreciating dollar “have resulted in an outflow of capital from emerging economies and are weakening their currencies.”

In October, the International Monetary Fund lowered its 2019 growth forecast for the United States by 0.2 percentage point from its July estimate to 2.5 percent. Similarly, the IMF revised down its 2019 growth estimate for China by 0.2 point to 6.2 percent.

The G20 groups Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, the United States and the European Union.