US Govt Pushes Targeted Regulations on China Investments
Germany and Japan lukewarm on ideas given their economic impact
US debt ceiling conflict keeps G7 policymakers wary of risks
Germany hopes for ‘adult’ decision on US debt
(U.S. debt ceiling, added context for German Finance Minister’s comments, paragraphs 4-6)
By Andrea Charal and Christian Kramer
NIIGATA, May 12 (Reuters) – Financial leaders of the Group of Seven (G7) nations are set to discuss plans to introduce targeted regulations on investments in China this week, analysts said. I see it as a double-edged sword that yields little profit. progressing.
G7 financial leaders gathering in Niigata have a lot of interest in China, and Japan, the current chair, is leading new efforts to diversify supply chains and reduce over-reliance on China.
However, if trade with the world’s second-largest economy were adversely affected, export-dependent countries such as Germany and Japan could be hit hard. do not share the same perception.
G7 countries can hardly afford to take more risks on their fragile economies as Washington struggles to resolve a debt ceiling dispute that could push the US economy into recession.
A meeting scheduled for Friday between US President Joe Biden and senior lawmakers has been postponed until early next week as both sides seek compromises to avoid a catastrophic default.
German Finance Minister Christian Lindner said Friday that US politicians will take an “adult” decision on talks to raise the $31.4 trillion debt ceiling, the maximum the US government is allowed to borrow. He said he was hopeful and warned that Germany’s debt ceiling poses risks. Otherwise the world economy will collapse.
Countering China’s “economic coercion”
The United States is at the forefront of pushing for stronger action against China. Treasury Secretary Janet Yellen said on Thursday that many of the G7 countries share US concerns over China’s use of “economic coercion” against other countries and are looking at ways to counter such actions. .
Germany has grown wary of China as a strategic rival and is considering steps to reassess bilateral ties, but fears it could be seen as building a G7 front against China. there is
Germany’s foreign direct investment in China continues to rise despite the German government’s desire to “endanger” its relationship with China, according to preliminary data provided to Reuters.
Next week’s G7 summit may discuss the introduction of targeted regulations on investment in China, but investment reviews will cover areas of strategic importance, German officials said on Thursday. said to
Discussions among finance leaders will lay the groundwork for the summit in Hiroshima.
The host country, Japan, is cautious about restricting foreign investment in China, given the potential impact on global trade and its own economy.
“It will be quite difficult to restrict foreign investment,” said one official, who asked not to be identified because of the sensitivity of the matter.
UK Finance Minister Jeremy Hunt told Thursday Keizai Shimbun that the G7 must counter China’s economic coercion, but did not mention investment restrictions.
Diversification of supply chains
Another initiative backed by the G7 is building partnerships with low- and middle-income countries to diversify supply chains from countries like China.
Japan will invite six non-G7 countries, including Brazil, India and Indonesia, to an outreach meeting on Friday to discuss supply chain partnerships.
But analysts are skeptical about how effective these measures against China will be.
“It’s very difficult to leave China out, given its economic power,” said Toru Nishihama, chief emerging markets economist at Dai-ichi Life Research Institute. “Doing so could disrupt global trade, damage global growth and hurt the G7 economies themselves.”
G7 finance leaders are expected to issue a joint statement after the three-day meeting on Saturday. (Reporting by Mr. Laika Kihara, Mr. Andrea Charal and Mr. Christian Kraemer; Additional reporting by Mr. Tetsushi Kajimoto and Mr. Takaya Yamaguchi in Niigata; Yoshifumi Takemoto in Tokyo; Editing by Mr. Kim Kogill and Alex Richardson)