China's Xi Jinping warns leaders against 'slamming brakes on monetary policies'

The leader of the world's second-biggest economy calls for a strengthening of co-operation to support the recovery from Covid

Pesident Xi Jinping of China says if fellow world leaders backtrack on commitments, it will lead to 'serious negative spillovers'. EPA

China’s President Xi Jinping urged the international community to work together to drive economic growth as the world recovers from the Covid-19 pandemic, and issued a warning against “slamming the brakes on monetary policies”.

Addressing delegates at the opening session of the World Economic Forum’s Davos Agenda conference, Mr Xi called for a bolstering of economic policy co-ordination.

He said if his fellow world leaders are tempted to backtrack on commitments, it would result in “serious negative spillovers” around the world, with developing countries bearing the brunt.

In a wide-ranging speech, Mr Xi also touched on the global battle against climate change, the coming Chinese New Year and Covid vaccine equity for developing nations.

The online conference is taking place after the WEF postponed its in-person annual meeting in Davos, Switzerland, because of the pandemic.

It is the second year in a row that the elite gathering of political and corporate power players in the Swiss Alps has been forced to go online.

Founder and executive chairman of the World Economic Forum Klaus Schwab listens to Xi Jinping during the online Davos forum. AFP

Risks of inflation are rising to the surface

Mr Xi said two years after the onset of the coronavirus crisis, the economy is still faced with an array of constraints while major disruption to global supply chains continues.

New drivers of economic growth need to be explored by the global community, he said, as he called on nations to remove barriers and seek integration to help “build an open world economy” based on “fairness and justice”.

He said such an approach would be vital to prevent the economy from facing another crisis.

For the world economy to be taken from crisis mode to well on the road to recovery, it is "imperative to strengthen macro policy co-ordination", the Chinese president said.

"Major economies should see the world as one community, think in a more systematic way, increase policy transparency and information sharing and co-ordinate the objectives, intensity and pace of fiscal and monetary policies so as to prevent the world economy from plummeting again," he said.

Mr Xi went on to call on leaders of major developed nations to "adopt responsible economic policies" and work together to address risks to stability.

“The global industrial supply chains have been disrupted, commodity prices continue to rise, energy supply remains tight – these risks compound one another and heighten the uncertainty about economic recovery," he said.

“The global low inflation environment has notably changed, and the risks of inflation driven by multiple factors are surfacing.

“If major economies slam on the breaks or take a U-turn in their monetary policies, there will be serious negative spillovers [that] would present challenges to global economic and financial stability and developing countries would bear the brunt of it.”

He said his country could serve as a rare pandemic success story as it is the only major economy to continue posting strong growth figures.

In 2021 China’s economy rebounded to record its best growth in a decade, helped by robust exports. It expanded by 8.1 per cent – its highest rate of growth since 2011.

However, there have been signs suggesting momentum is slowing on weakening consumption and a property downturn, pointing to the need for more policy support.

Growth in the fourth quarter hit an 18-month low, government data showed on Monday. The posting came shortly after China’s central bank moved to prop up the economy with a cut to a key lending rate for the first time since early 2020, when the pandemic was in its first stages.

Mr Xi said the economy’s “strong resilience, enormous potential and long-term sustainability” would be enough to help it to face pressures from outside.

“We have every confidence in the future of China’s economy,” he said.

In recent months, China's property market has slowed as regulators stepped up a campaign to cut high rate of borrowing, triggering defaults at some highly indebted companies.

In December, the level of property investment dropped 13.9 per cent from a year earlier, falling at its fastest pace since early 2020.

Power forward with ‘courage and strength of a tiger’

Looking forward to the Chinese New Year on February 1, when the Year of the Tiger will begin, Mr Xi said China would “act with the courage and strength of the tiger to overcome all obstacles on our way forward”.

He called on fellow leaders to join him in doing “everything necessary to clear the shadow of the pandemic and boost economic and social recovery and development so that the sunshine of hope may light up the future of humanity.”

There are new opportunities to be found as the world recovers from the coronavirus crisis, he said, and co-operation would be needed to "open up new horizons on the shifting landscape".

Xi Jinping urged leaders to drop the 'Cold War mentality'. His comments were interpreted as a veiled swipe at US President Joe Biden. Reuters

‘Our world is far from tranquil’

President Xi urged other leaders to discard a “Cold-War mentality” at a time of rising geopolitical tension – a thinly veiled swipe at the US.

He offered a sober warning about confrontation between major powers, saying it could have “catastrophic consequences”.

"Our world today is far from the tranquil, rhetoric that stokes hatred and prejudice abound," he said, according to the 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."

Tension between Washington and Beijing have been simmering on a range of issues – from Taiwan and intellectual property to trade, human rights and the South China Sea.

The Chinese president urged his fellow leaders to discard the Cold War mentality and "seek peaceful coexistence and win-win outcomes".

He dismissed protectionism and unilateralism as alternative approaches, saying they hurt the interests of all parties.

"Even worse are the practices of hegemony and bullying, which run counter to the tide of history," Mr Xi said.

"A zero-sum approach that enlarges one’s own gain at the expense of others will not help. The right way forward for humanity is peaceful development and win-win co-operation.”

Covid still a 'serious threat to health and economy'

Despite the major progress that the international community has made against the Covid pandemic, Mr Xi said the crisis is “proving a protracted one” and pointed to the emergence of new highly transmissible variants.

He issued a warning that the pandemic continues to pose a “serious threat to people’s safety and health, and exerts a profound impact on the global economy”.

"Strong confidence and co-operation" are the only ways to defeat the crisis while blaming each other would only cause nations to encounter a "needless delay" in recovery, he said.

At the beginning of the pandemic, Donald Trump, US president at the time, infamously called the disease "the China virus" and blamed the Asian country for allowing it to spread beyond its borders.

Economic growth must not be sacrificed in climate fight

China is the largest contributor to carbon emissions and emits more greenhouse gasses than the entire developed world combined.

Beijing’s attitude towards climate concerns has long been considered to be a major stumbling block in the mission to create a cleaner, greener world.

Last November, Mr Xi’s no-show at the UN climate summit in Glasgow, Scotland, in November was regarded as a blow to international co-ordination to tackle the divisive issue.

The Chinese president used his speech to insist his government would “remain committed” to working with international partners to reduce its contribution to climate change.

He repeated his stance that economic growth should not be treated as more important than natural resources but also said growth should not be sacrificed to protect the environment, a scenario which he likened to “climbing a tree to catch a fish”.