China pulls out of World Bank, IMF talks, as IMF lowers growth forecast
A vegetable stall owner waits at his street side shop in Hong Kong on October 9, 2012. The IMF cut its growth forecasts for developing Asia, blaming a slowdown in Europe and the US, and warned that China’s attempts to boost its economy had not taken hold.
Major banks in China will skip the World Bank and International Monetary Fund meetings in Japan this week because of the territorial dispute between the two countries.
Chinese state news agency Xinhua reported that the Industrial and Commercial Bank of China (ICBC), Bank of China, China Construction Bank and Agricultural Bank of China have pulled out of the IMF meetings over disputed islands, called Senkaku in Japan and Diaoyu in China, according to Reuters.
Agence France Presse noted that the disputes have touched off protests in China and hurt Japanese companies in the Chinese market, as China and Japan have traded insults.
IMF chief Christine Lagarde said in an interview last week that the world cannot afford for the economic heavyweights to avoid resolution of the dispute. The dispute has raised fears of an already weakened economy being dragged even lower, according to AFP.
The IMF's 188 member nations will meet in Tokyo this week as bank lending has remained slow and confidence in the global financial system is "exceptionally fragile," Bloomberg reported.
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Meanwhile, the IMF has cut its global economic forecasts again, saying the risks of a slowdown were "alarmingly high," according to The New York Times. It said the risks could largely be attributed to policy uncertainty in the US and Europe.
In its latest report, the IMF forecast global growth of 3.3 percent in 2012 and 3.6 percent in 2013, compared to its report last July when it predicted 3.5 percent for this year and 3.9 percent for next year.
The new estimates also suggests chances of recession are 15 percent in the US, 25 percent in Japan and over 80 percent in the euro zone, said the Times.
"A key issue is whether the global economy is just hitting another bout of turbulence in what was always expected to be a slow and bumpy recovery or whether the current slowdown has a more lasting component," said the IMF in its World Economic Outlook report. "The answer depends on whether European and US policy makers deal proactively with their major short-term economic challenges."
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