(Bloomberg) -- The world economy is enjoying the fastest and broadest expansion in years, though risks remain amid early signs of a potential trade war, the specter of tighter financial conditions as well as increased public and private indebtedness. Those issues promise to be some of the main topics of discussion as central bankers and finance ministers gather in Washington this week for spring meetings of the International Monetary Fund and World Bank.
Here are the latest developments from the meetings, updated throughout the day. (Time-stamps are local time in Washington.)
White House’s Hassett Urges World to Pressure China (11:12 a.m.)
White House Council of Economic Advisers Chairman Kevin Hassett said the world should put pressure on Beijing, calling on other countries to hold the Asian nation to task on trade.
“The entire world community needs to urge them to change” their behavior, he said at an event hosted by the Institute of International Finance in Washington, adding that China needs to act like one of the world’s biggest economies and abide by the rule of law.
His comments come as both America and China try to build international coalitions to support their respective positions on trade. The U.S. argues that China needs to lower its barriers to imports and foreign investments in the country, while Beijing is criticizing President Donald Trump’s threats to levy tariffs on Chinese goods.
World Bank Shifting Loans Away From China (10:42 a.m.)
The World Bank will loan more to countries that are less well-off than China, after the Trump administration criticized the development lender for providing funds to the Asian nation.
“We will lend more over time to lower middle-income countries,” World Bank President Jim Yong Kim told reporters in Washington. Kim said the lending plan doesn’t target any particular country.
The World Bank describes China as an upper middle-income country with complex development needs.
White House officials have criticized the relationship between Beijing and development lenders, saying China doesn’t need multilateral funds when it can raise money in global financial markets. The World Bank committed $2.4 billion in loans last year to China, up from $2 billion the year before.
But Kim was quick to point out the World Bank will still work with Beijing. “China has been and will continue to be an extremely important partner for the World Bank Group,” he said.
U.S.’s Calabria Says Goal is to Signal Trade Pain (10:30 a.m.)
U.S. Vice President Mike Pence’s chief economist, Mark Calabria, said the administration wants more trade, not less -- but it also wants to move China toward a market-based economy that plays by international rules.
“We certainly want to avoid a trade war, but you have to credibly signal that you are going to be willing to put some pain both on the other side as well as yourself,” Calabria said at the Global Finance Forum in Washington.
That said, he dismissed the idea that China could retaliate in government debt markets. China is America’s largest foreign creditor, holding about $1.2 trillion in Treasuries.
“You can’t get out of that market position without hurting yourself -- the reality is that China cannot dump U.S. Treasuries without taking significant losses on their U.S. Treasuries,” Calabria said.
Lagarde Says Trade Threats May Dent Confidence (9:34 a.m.)
International Monetary Fund Managing Director Christine Lagarde said the major challenge from the current trade frictions is a slip in business confidence that may dent investment.
“Some modeling has been done, and the actual impact on growth is not very substantial” when you measure the impact on economic output from trade threats, said International Monetary Fund Managing Director Christine Lagarde at a press briefing in Washington during the fund’s spring meetings.
“What is more important is something that’s difficult to measure in the short term and that has to do with the erosion of confidence,” says Lagarde, adding that investors are more reluctant to invest when they can’t plan supply chains.
The near-term near term prospects for the global economy are bright, but more “clouds are accumulating on the horizon” than six months ago, and efforts must be strengthened to “sustain this upswing" and ensure long-term growth, she said.
What’s Happening on Thursday:
- 2pm: Market Forces at Work panel with Argentina Public Finance Minister Luis Caputo and UBS Group Chairman Axel Weber
- 3:30pm: New Challenges Facing the Global Economy with IMF First Deputy Managing Director David Lipton
- 5:15pm: G-24 Press Conference with Sri Lanka State Minister of Finance Eran Wickramaratne, Ghana Finance Minister Kenneth Ofori-Atta
Here’s What’s Happened This Week:
- The world’s debt load has ballooned to a record $164 trillion, a trend that could make it harder for countries to respond to the next recession and pay off debts if financing conditions tighten, the IMF said in its semi-annual Fiscal Monitor report.
- New IMF data show America’s debt-to-GDP ratio is projected to exceed that of Italy by 2023.
- Threats to the global financial system are rising, with the price of risky assets surging in a manner reminiscent of the years before the global financial crisis, the fund said in its Global Financial Stability Report.
- Investors should be prepared for more volatility as overstretched markets adapt to the end of easy money, the IMF’s capital-markets department chief Tobias Adrian said in an interview.
- The IMF published its World Economic Outlook report, leaving its global growth forecast unchanged at 3.9 percent for this year and next while boosting its outlook for the U.S.
