Power struggle may be catastrophic, says Xi Jinping

Chinese President Xi Jinping has urged the West against ‘slamming the brakes’ on interest rates, and warned confrontation between major powers could have ‘catastrophic consequences’.

Chinese President Xi Jinping addresses the World Economic Forum in Davos, Switzerland, on Monday. Picture: AFP

Chinese President Xi Jinping warned on Monday that confrontation between major powers could have “catastrophic consequences” in a speech to world leaders at an all-virtual Davos forum.

In an unprecedented move, Mr Xi urged Western countries to not “slam the brakes” on interest rates, saying such moves could “challenge” global economic stability, with developing countries bearing the brunt of any fallout.

For the second year in a row the face-to-face gathering of political and corporate power players in the Swiss Alps has had to go ­online thanks to a coronavirus pandemic that shows no sign of abating.

Mr Xi opened proceedings with a speech much like the one he delivered virtually last year.

He touted China – where the coronavirus first emerged in late 2019 – as a rare pandemic success story and the only major economy to continue posting strong growth.

He presented himself as the defender of multilateralism and also gave sober warnings for the future as relations between major powers plunge.

“Our world today is far from the tranquil, rhetoric that stokes hatred and prejudice abound,” he said, according to an official translation of the speech that was streamed online.

“History has proved time and again that confrontation does not solve problems, it only invites catastrophic consequences.”

China stuck to a strict policy of targeting zero Covid cases once it stamped out its initial outbreak.

Its borders remain largely closed to outsiders but it has ­remained the world’s vital manufacturing base throughout the pandemic.

In his speech to the World Economic Forum in Davos, Mr Xi said the world had fought a ­“tenacious battle” against the “once-in-a-century pandemic”.

But he said the pandemic was “proving a protracted one” with new variants spreading faster than before, deepening challenges for the global economy.

“The global industrial supply chains have been disrupted,” he warned.

“Commodity prices continue to rise, energy supply remains tight.

“We must do everything necessary to clear the shadow of the pandemic and boost economic and social recovery and development,” he said.

“If major economies slam on the brakes or make major U-turns in their monetary policies there will be serious negative spillovers. They would present challenges to global and economic financial stability and developing countries would bear the brunt.”

On Monday, China reported its economy grew 8.1 per cent in 2021, but warning of further challenges.

The People’s Bank of China (PBOC) also moved to lower the interest rate on 700bn yuan ($US110bn) worth of one-year medium-term lending facility loans to 2.85 per cent – the first such cut since April 2020.

It also cut the seven-day reverse repurchase rate, another lending measure, and pumped another 200bn yuan of medium-term cash into the financial system in a move that’s in contrast with other major central banks around the world.

Mr Xi said China was keen “for people-to-people exchange in a bid to facilitate cross-border trade, keep the industrial supply chain secure and smooth, and promote steady and solid progress in global economic recovery”.

But there were no announcements in the speech on when or whether Beijing might relax its tight border controls.

China has remained comparatively free of the coronavirus but is battling a spate of local outbreaks in several provinces and key cities just weeks before it hosts the Winter Olympics in ­Beijing.

Mr Xi is also moving to secure a third term at a major gathering of the Communist Party in the northern autumn and has made clear stability must remain a ­priority.

AFP