G-20 finance chiefs warn of trade, geopolitical threats to growth

Participants gather prior to the G-20 finance ministers and central bank governors meeting in Fukuoka, Japan, on June 8, 2019.
Participants gather prior to the G-20 finance ministers and central bank governors meeting in Fukuoka, Japan, on June 8, 2019.PHOTO: REUTERS

But they drop call to end US-China trade war from communique after heated negotiations

FUKUOKA (Japan) • Group of 20 (G-20) finance leaders yesterday said that trade and geopolitical tensions have intensified, raising risks to improving global growth, but they stopped short of calling for a resolution of a deepening US-China trade conflict.

After fiery negotiations that nearly aborted the issuance of a communique, finance ministers and central bank governors meeting in southern Japan repeated tepid support for a rules-based multilateral trading system.

"Global growth appears to be stabilising and is generally projected to pick up moderately later this year and into 2020," the G-20 finance leaders said in a communique issued as the meetings in Fukuoka closed.

"However, growth remains low and risks remain tilted to the downside. Most importantly, trade and geopolitical tensions have intensified. We will continue to address these risks and stand ready to take further action."

It also said that G-20 finance leaders had agreed to compile common rules by next year to close loopholes used by global technology giants such as Facebook and Google to reduce their corporate taxes.

The communique also contained pledges to increase debt transparency on the part of borrowers and creditors. Another priority is sustainable infrastructure development, an issue brought into sharper focus by concerns that China's massive Belt and Road infrastructure drive was saddling poor countries with debt they cannot repay.

However, the final language excluded a proposed clause to "recognise the pressing need to resolve trade tensions", which was dropped from a draft debated on Saturday.

 
 
 

The deletion, which G-20 sources said came at the insistence of the United States, shows a desire by Washington to avoid encumbrances as it increases tariffs on Chinese goods. The statement also contains no admissions that the deepening US-China trade conflict is hurting global growth.

International Monetary Fund (IMF) managing director Christine Lagarde said that "the first priority should be to resolve the current trade tensions" while working to modernise international trading rules.

"This would be the best way for policymakers to give more certainty and confidence to their economies and to help, not hinder, global growth," she said.

The global economy remains precarious despite projections for continued growth and early signs of stabilisation since the slowdown, added Ms Lagarde.

The IMF last week warned that while growth is still expected to improve this year and the next, the US-China tariff war could cut 0.5 per cent from global gross domestic product output next year, about the size of G-20 member South Africa's economy.

US Treasury Secretary Steven Mnuchin said on Saturday that he did not see any impact on US growth from the trade conflict and that the government would take steps to protect consumers from higher tariffs.

Mr Mnuchin met People's Bank of China (PBOC) governor Yi Gang yesterday in the first meeting of high-level US and Chinese officials in a month, but it produced no immediate result.

Mr Mnuchin described the meeting as "constructive" and "a candid discussion on trade issues", but offered no further details.

The PBOC said in a statement that the two finance officials exchanged views on the global economic and financial situation, G-20 issues, as well as topics of mutual interest.

Mr Mnuchin said that US President Donald Trump and Chinese President Xi Jinping would meet at the G-20 Summit on June 28 and 29 in Osaka, but the meeting has not been confirmed by China.

REUTERS, BLOOMBERG

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A version of this article appeared in the print edition of The Straits Times on June 10, 2019, with the headline 'G-20 finance chiefs warn of trade, geopolitical threats to growth'. Print Edition | Subscribe