China and the United States should use international multilateral governance frameworks to deal with trade friction and prevent broader headwinds for global economic growth during the second half of this year, experts said.
Sino-U.S. trade friction is expected to hurt the global economy more intensively than the two sides, especially in the third quarter and that has prompted some international organizations, including the International Monetary Fund (IMF), to downgrade its full-year economic growth prospects for this year and the next, said Zhu Guangyao, former vice-minister of finance.
Zhu made the remarks on Saturday at a seminar hosted by the National Association of American Studies (NAAS), a newly established alliance of more than 20 Chinese think tanks. The think tank alliance, initiated by the International Economics and Finance Institute under the Ministry of Finance, will especially focus on research related to trade and economic issues.
China will continue to support the multilateral governance system, especially under the framework of the Group of 20 to facilitate inclusive growth, innovation and cross-border infrastructure investments, said the former deputy minister.
"China's opening up makes it an important participant in the G20－a framework that is suggested to further discuss joint measures among members, in dealing with rising trade tensions and preventing global economic and financial vulnerabilities", said Zhu.
In face of deepening changes to the global governance structure, one of the world's most remarkable challenges within 70 years, China needs to reconsider the future's global governance system and the role it can play in that framework, through continually promoting opening up and to raise governance plans as well as an all-around development strategy, said Zhu Min, head of the National Institute of Financial Research at Tsinghua University, at the same seminar on Saturday.
According to Zhu Min, who is also a former deputy managing director of the International Monetary Fund, potential fluctuations in global financial markets should be a matter of concern during the further opening-up process. Uncertainties could rise when the U.S. Federal Reserve is likely to accelerate rate hikes and monetary policy normalization in the coming months, because the higher tariffs could lift product prices and fuel inflation expectations.
The U.S. has released a proposed list of China's imports worth $200 billion on which it would look to impose tariffs. Including the potential retaliatory tariffs by trade partners, the total value of affected goods could rise to $461 billion, or 2.5 percent of global trade and 0.5 percent of global GDP, if these measures are implemented, according to a recent research from Morgan Stanley.
It is estimated that the direct impact on global growth resulting from the two sets of targeted tariffs raised by the U.S. on imports from China would rise to 10 to 12 basis points. This include a likely drag on U.S. growth of 0.3 to 0.4 percentage points, and a growth impact on China of around 0.3 percentage points.
"The potential imposition of further tariffs on imports from China reaffirms our view that trade tensions will likely linger for longer. While we still see negotiations as the endgame, getting there will take longer, leading to increased risks to business confidence and capex," said Robin Xing, a Chinese economist with Morgan Stanley.
China's former vice-foreign minister Fu Ying said that "it has entered a new era, full of changes and adjustments in terms of both international situation and the relationship between China and the world".
The potential impacts on global governance structure will come from both China and the U.S. development, she said, who sees challenges and opportunities in the changes and suggested to prepare well for dealing with the trade tensions in the future.
