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October 16, 2021

China’s top banker snubs IMF meeting

Risks to global stability rise, report warns.

China’s top banker has pulled out of the IMF meetings in Tokyo Wednesday in a move widely seen as a protest for the ongoing dispute between Japan and China over islands in the East China Sea, CNN informs. Zhou Xiaochuan, the governor of the People’s Bank of China, was scheduled to give the Per Jacobsson lecture at the IMF-World Bank annual meetings being held this year through Sunday in Tokyo.A spokesperson for the IMF said they were told two days ago that Zhou’s schedule might require him to cancel his lecture in Tokyo. “His deputy Yi Gang will represent him at the IMF-World Bank Annual Meetings and will deliver his Per Jacobsson Lecture,” the spokesperson said. Past speakers for the lecture have included U.S. Federal Reserve Chairman Alan Greenspan, Italian Prime Minister Mario Monti and Mohamed A. El-Erian, CEO of PIMCO.Zhou’s decision not to attend follows news earlier this week that representatives from China’s four major banks – the Industrial and Commercial Bank of China, Bank of China, China Construction Bank and Agricultural Bank of China – would not be attending the IMF meetings in protest of the territorial dispute.Last month the Japanese government bought the disputed islands from the Japanese family that privately owned the islands for 2.05 billion yen (USD 26.2 million). That move brought already rising tensions to a boil in China, where often violent protests broke out in dozens of Chinese cities — from Guangzhou in the south to Qingdao in the north. Japanese cars, stores and factories were damaged in many areas.Japan’s largest automakers said Tuesday that sales in China nosedived in September in the face of Japanese product boycotts. Toyota sales in China dropped 48.9% compared to a year ago. Honda sales were down 40.5% from 2011, and Nissan reported a 35.3% decline in sales.In other developments, falling market confidence has led to money fleeing peripheral eurozone nations such as Spain and mounting pressure on banks, raising the risks of a credit crunch and recession, the International Monetary Fund said in a report released Wednesday at meetings in Tokyo. While moves in September by the European Central Bank to buy government bonds have helped stabilize markets, governments need more action to return market confidence, according to the IMF’s Global Financial Stability Report. “If they do not, the result will be an acceleration in deleveraging, which raises the risk of a credit crunch as banks make fewer loans, and an ensuing economic recession,” the IMF said.The report comes after the chief economist for the IMF told CNN Tuesday that there are two great threats to the global economy: the “fiscal cliff” in the United States and the eurozone debt crisis.“I think a (global) recession is not very likely except for two possible tail risks: The first one is a possible fiscal cliff in the U.S. If for some reason we actually jump all the way down the cliff, this would be an enormous fiscal contraction,” said Olivier Blanchard, IMF economist. “It would be a U.S. recession, and God knows what would happen to the world.”

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