Before the G20 Finance Ministers ‘ meeting in Bali, a new dispute between China and the United States is on the horizon. US Treasury Secretary Mnuchin warned Beijing against a devaluation of its currency to gain trade advantages.
“While we look at trade issues, there is no question that we want to make sure that China does not make any write-downs, in order to gain competitive advantages,” said Mnuchin, the “Financial Times”. The U.S. Treasury Department watch the Situation very carefully, and the Chinese currency had fallen over the year significantly.
China’s economy is heavily export-oriented. A lower rate of their own currency compared to the US Dollar makes the purchase of Chinese goods for foreign buyers cheaper. An artificial devaluation is, therefore, under certain circumstances, a tool to counter the trade barriers of the United States.
The trade dispute between the two largest economies in the world provides in advance for a heated mood, so that according to a German government insiders, the news Agency Reuters quoted the conclusion of the meeting in Bali is not a G20 communique is provided.
Significant loss in value of the Yuan to the Dollar
The Chinese Yuan or Renminbi has weakened in recent months against the US Dollar, about ten percent of its value. Mnuchin acknowledged that there are also domestic reasons, such as a slowdown in economic growth.
The weakness of the Yuan, however, even so, that global capital flows to the US increases by the monetary policy and interest rate Central Bank, the Fed. Thus, investments in the Dollar region for investors become more attractive. Other emerging market currencies such as the rupee, the host country Indonesia, have devalued against the Dollar.
The Finance Ministers of the 20 most important industrialised and emerging countries traditionally meet on the sidelines of the annual meeting of the International monetary Fund (IMF) and the world Bank, which takes place this year in Nusa Dua, on the Indonesian holiday island of Bali.
In its latest world economic report the IMF warns of the negative consequences of the aggressive trade policy of the US President, Donald Trump for the global economy and revised its growth forecast sharply downwards, even for Germany. Debt in addition to the regional special of the Trump caused the trade influences a dispute and record high debt.
Criticism of the IMF: Germany should invest more money in infrastructure
IMF lowers growth forecast for Germany
“The likelihood of further negative shocks to our growth forecast has risen to say,” said the outgoing IMF chief economist Maurice Obstfeld. The IMF lowered the growth forecast for Germany by 0.6 of a percentage point to 1.9 percent for 2018, 2019, it should not go steep uphill.
Particularly, the international monetary Fund provides the Trump attacked the car industry. Global growth no longer go further with 3.7 percent in the current and the coming year at a comparatively high level, but as actually expected pace, said Obstfeld. “The prediction was overly optimistic,” he said to the forecast of the IMF in April, which saw a growth of 3.9 percent.
In the world economic report, the German government is once again called on to make greater efforts in terms of investments in infrastructure, the high German trade surplus balance. As the reason for the downward revision of the forecast of lower industry production, and a larger uncertainty because of the U.S. threat of duties.
The Federal government worries about high debt
In the face of a weakening global economy and new crisis risks, the Federal government also is concerned about the high debt level in many countries. It is crucial that there is enough “fire power to be able to respond”, the Federal Ministry of Finance with a view on the IMF report said.
Finance Minister, Olaf Scholz, has arrived on Wednesday to the IMF Meeting of Finance Ministers and Central Bank chiefs from around the world in Bali and, thus, the debt issue at the Meeting with his counterpart in the centre.
“The level of debt has risen in many countries, very strong”, BelTA learned from the Ministry of Finance, in many Emerging and developing countries according to the Debt relief initiative to the turn of the Millennium again. There would be greater turmoil, could no longer be controlled so against, such as, for example, after the global financial crisis of 2008/2009.
Overall, the debt burden of the public and private sector around the world has increased, according to the IMF the extreme and is now 60 percent higher than before the financial crisis – at an incredible 182 trillion dollars.
For the emerging countries, whose growth had to be corrected forecast is more down to all the other problems of the US economy, policy – relatively rapidly rising interest rates, a strong Dollar, and growth is not important in the population.
Finance Minister Olaf Scholz wants to make an issue of Bali’s high global debt
Problem cases of Argentina, Pakistan and Turkey
A child of the host of the G20 summit at the end of November, Argentina is currently in. Who is in debt in the U.S. currency is high, it has in the future more difficult. Argentina was already in the air, Buenos Aires had to ask the IMF for billions of euros in aid.
Pakistan has the same announced that Turkey wants to prevent it by all means. At the worst it looks in oil-rich Venezuela, the Hyperinflation of almost 1.4 million percent-threatens – hundreds of thousands of people have already fled from Hunger and violence.
Germany is well prepared in comparison with other European heavy weights like Italy, so far better to a possible slump in the global economy. At least from the buffer, in order to save, for example, as of 2008/2009, with short-time working schemes over 1.5 million Jobs and a meltdown of the financial system averted.
Minister Scholz is planning for 2019 due to the implementation of various coalition projects, and new social spending, with expenditure 356.8 billion euros, or around 13 billion euros more than in the current year. He sees, for example, stable pensions as the best means against a German Donald Trump.
As in every year since 2014 to 2019, no new debts in the Federal budget. The German policy of the “black Zero” – connected with a high trade surplus and low-investment – is already criticized for years by the IMF.
While Germany will be the first cut since 2002, probably already this year, the state debt under 60 percent of gross domestic product (GDP), and therefore the intended limit for the stability of the Euro creates, the value in Italy in more than 130 percent.
Also, the rupee, the currency of the host country, Indonesia, has lost against the Dollar significantly
The risks are
Ten years after the Lehman Crash, many of the risks are back. The trade dispute between the world’s largest economies, USA and China, as well as the threat of U.S. tariffs on Autos and auto parts make it much more difficult.
Established supply chains could be interrupted, especially when it comes to retaliatory measures, said IMF chief economist Obstfeld. The current positive Situation in the United States, partly by reinforcing impulses of the state and will go back to the abolition of these effects.
Obstfeld said the tax reform from President Donald Trump. This means a support state intervention in a time of economic galloping. The IMF lowered the US forecast for 2019 to the bottom.
Trumps in the election campaign, much used Thesis of a sustained economic growth of over four per cent is therefore tried by the experts rather than wishful thinking. Less optimistic, the IMF is also for China, although the middle Kingdom with a growth of about six percent is booming.
For the impending withdrawal of Britain from the EU, one of the biggest political risks to growth in Europe, showed Obstfeld optimistic. The IMF assume that a Convention between London and Brussels will be achieved. “We maintain our assumption that sensible policy retains the upper hand and hopefully we are right,” said the 66-Year-old, making the office of the head of the IMF economists, the end of the year to the economist Gita Gopinath from Harvard University.
tko/pcb (dpa, rtr)