As markets collapse, finance chiefs urge the US and China to cool it down

NUSA DUA, Indonesia – World Bank and IMF leaders on Thursday urged the United States and China to dispel their disagreement over technology policy and to abide by global trade rules, as stock prices plummet had dismissed the potential danger of a conflict between the two largest economies.

Global economic growth is slowing but remains strong, said Christine Lagarde, Executive Director of the International Monetary Fund, on the sidelines of the annual meeting of the IMF and the World Bank, to be held this week on the Indonesian island of Bali.

Countries are for the most part in a "strong position," she said, "which is why we think we do not see what is called" contagion "."

The fluctuations that shook Wall Street the day before, Asia and Europe on Thursday, resulting in a 5.2% decline in the Shanghai Composite Index and nearly 4% in the same time last year. Japanese index Nikkei 225, partly reflect the rise in interest rates in the United States and in some other countries, as well as trade, she said.

"It's the combination of the two that probably shows some of the tensions we're seeing in terms of indices, short-term indicators, and the potential volatility of the markets," said Lagarde.

The US and Chinese exchanges of tariff penalties in their dispute do not help, she said.

His advice was threefold: "De-escalate. Repair the system. Do not break it. "

It acknowledged that the Geneva-based World Trade Organization had made little progress in recent years towards a global agreement on trade rules that could solve problems such as policy complaints. Chinese. US President Donald Trump has said he is unfairly extracting advanced technologies and placing foreign companies at a disadvantage in his quest for dominance of certain industries.

"We strongly recommend that work be intensified on a stronger, fairer and more responsive global trading system for our purpose," she said in her opening remarks.

In a somewhat oblique way, she stated that policies to create excessive "dominance" were not compatible with free and fair trade.

The IMF downgraded its global economic growth forecast from 3.7 percent this year to 3.7 percent. He also published this week reports on public finances and financial stability that warn of the risks of disruption of global trade.

World Bank President Jim Yong Kim said the World Bank is working with developing countries to prepare for further deterioration.

"Trade is essential because it's what has allowed people to come out of extreme poverty," Kim said. "I am a globalist. It's my job. This is our only chance to end extreme poverty. We need more exchanges, not less exchanges, "he said.

Kim said the World Bank has launched a "Human Capital Index" to help countries rank according to the level of their investments in areas such as education and health care.

Policies to create such human capital are among the "smartest investments that countries can make," he said.

He congratulated Indonesia, a Muslim-majority Muslim host country of 260 million people, for fostering strong growth, while stressing that much remained to be done. The country is ranked 87th out of 150 countries in the list.

Indonesia has suffered many disasters in recent months. On Thursday, before daybreak, an earthquake caused the death of three people at least three people just two weeks after the earthquake and tsunami that struck a central region of the archipelago, making more than two 000 victims and leaving perhaps thousands of others buried in the mud. .

The magnitude 6.0 earthquake off Bali shocked the IMF and World Bank delegates' meeting area, but no sign of significant damage was found.

Annual financial meetings are taking place at a time when non-trade trends are causing increasing concern, such as rising borrowing costs in the United States and other regions, to curb growth and control inflation. Rising interest rates are pulling investment flows from emerging markets in Asia and Latin America at a time when export growth may be slowing.

Argentina and Pakistan, Venezuela and Zimbabwe are among the countries facing crises. The slowdown in growth in China and growing indebtedness of some developing countries, spurred by projects associated with the Beijing Belts and Roads Initiative, aimed at developing ports, roads and other also more and more worries.

Lagarde said the IMF will send a team to Pakistan in the coming weeks after a meeting with his finance minister, Asad Umar, in which he requested an emergency loan.

The IMF chief did not say how much Umar had asked. According to analysts, Pakistan is asking for $ 8 billion in loans to deal with a balance of payments crisis. The Pakistani currency plunged about 7% at the beginning of the week after the loan application was made public.

When asked if IMF assistance could be a "bailout" for Chinese loans, Lagarde said any aid of this type should be fully transparent.

"Whatever our job, we need total understanding and complete transparency about the nature of a country's debt," she said.

The annual summit on global finance brings together central bankers and finance ministers, development experts and civil society groups from around the world.

Bali has already suffered terrorist bombings and the event was taking place in a climate of heightened security. A convoy of armed troop transports was lined up along a beach trail and access to the area was tightly controlled.

Nevertheless, a dozen activists preoccupied with land grabbing and other problems sometimes associated with World Bank-sponsored projects staged a brief peaceful demonstration against the cancellation by local authorities of 39, a conference that they were to organize in the nearby city of Denpasar.

"If they do not want to hear our voices anymore, what kind of projects do we expect?" Said Joan Salvador, a member of a group of Filipino women.

The people involved had badges allowing them to enter the tightly guarded place, and an IMF official said that she would convey their concerns "at the highest level".

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Associated Press reporter Hau Dinh contributed to this report.

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