NUSA DUA, BALI - Trade tensions will rattle the global economy significantly, and countries must work together towards a constructive solution, urged China's central bank governor Yi Gang, who said his country is sincerely looking to resolve tensions with the United States.
His call came a day after US Treasury Secretary Steve Mnuchin dismissed fears that the US-China trade row would threaten the world economy, insisting that Washington's moves were a bid to push for a "more balanced trading relationship" with Beijing to the benefit of all.
But Mr Yi stressed on Sunday (Oct 14) that the trade dispute would lead to a lose-lose situation, pointing out that representatives from over a dozen countries he met in Bali over the past week had all reported that their economies felt the negative impact.
The International Monetary Fund (IMF) last week slashed global growth forecasts to 3.7 per cent in the light of rising trade tensions.
Mr Yi agreed with this revision, saying at the Group of 30 (G-30) International Banking Seminar that trade tensions have created negative expectations and uncertainties, unsettling markets.
"(China is) sincere in showing that we are willing to have a constructive solution," he said. "We have to realise the significant negative impact of trade tensions, and the whole world should work together to seek a constructive solution."
The US has been vocal about its goods trade deficit with China, but Mr Yi pointed out on Sunday that the US has a hefty US$40 billion per year services trade surplus with his country.
This surplus, said Mr Yi, has grown at about 20 per cent a year.
China's current account surplus, he added, has also been narrowing over the years.
China will press on with reforms to open up its economy, as well as strengthen intellectual property rights protection, said Mr Yi.
He said: "We think that the rules-based multilateral system is working. We think that globalisation is working, that competitive advantage and free trade is working. So we are going to follow that principle."
"But we are also preparing for the worst," added Mr Yi, noting that many people in China are bracing themselves for the possibility of a prolonged trade war.
The annual seminar - hosted by Singapore's Deputy Prime Minister Tharman Shanmugaratnam - saw central bankers from around the world discussing issues such as the world economy and inclusive growth.
Mr Tharman is chairman of the G-30, an international panel of top financial experts that seeks to deepen understanding of global economic and financial issues.
The shadow of recent trade disputes and rising protectionism hung over the session.
Mr Francois Villeroy de Galhau, governor of France's central bank noted that the indirect effects of protectionism - such as diminishing business confidence - are often underestimated.
Chairman of the G-30 board of trustees Jacob Frenkel noted that the plea to protect the multilateral trade system surfaced time and again at the annual meetings of the IMF and World Bank over the past week.
"Maintain the global system. Maintain mutilateralism. Remember that these institutions were born about close to 75 years ago," he said. "There was a logic to it. They are being modified because markets have changed and financial markets play a different role, but it is a call for appropriate multilateralism rather than going back to bilateralism."
The heavy discussions were lightened with Dr Frenkel declaring Christopher Columbus, the Italian explorer who went looking for Asia but found America instead, an economist who "brought all the problems", adding: "Now the same America has created the tensions, and we hope that we will learn the lessons."
In the same spirit, Mr Tharman wrapped up the seminar with words of wisdom from yet another thought leader.
"This was an economist called Elvis Presley, who's unfortunately deceased now but made a significant impact on economic thought," said Mr Tharman to raucous laughter. "And in one of his master treatises he said: 'A little less conversation, a little more action, please. A little less fight, and a little more spark. Close your mouth and open up your heart, and, baby, satisfy me.'"