# G7 finance heads face tricky trade-off in debating steps to counter China Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2023-05-12 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: G7 Finance Leaders Wrestle to Counter China's Trade Meta Description: Join the G7 as they weigh the risks and rewards of countering China's economic influence through targeted investment controls. Find out more now! URL: https://financedigest.com/g7-finance-heads-face-tricky-trade-off-in-debating-steps-to-counter-chinahtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2023-05-12t062301z2lynxmpej4b052rtroptp4g7-japan-finance-1736814021884-compressed.jpg) # G7 finance heads face tricky trade-off in debating steps to counter China By Andrea Shalal and Christian Kraemer NIIGATA, Japan (Reuters) -Finance leaders of the Group of Seven (G7) advanced economies will debate this week the idea of implementing targeted controls on investments to China, which analysts see as a double-edged sword that could make little headway. China is much on the minds of G7 finance leaders gathering in the Japanese city of Niigata, with current chair Japan leading fresh efforts to diversify supply chains and reduce their heavy reliance on Beijing. But the group is not on the same page in terms of how far it should go in countering China, as hurting [trade with the world’s](https://www.financedigest.com/anglo-gulf-trade-bank-partners-with-publicis-sapient-and-microsoft-to-launch-worlds-first-end-to-end-digital-trade-finance-bank.html "Anglo-Gulf Trade Bank partners with Publicis Sapient and Microsoft to launch world’s first end to end digital trade finance bank") second-largest economy could deal a heavy blow to export-reliant countries such as Germany and Japan. The G7 nations can little afford further risks to their fragile economies, with Washington struggling to resolve a [debt ceiling](https://www.financedigest.com/world-stocks-climb-on-hopes-of-successful-debt-ceiling-outcome.html "World stocks climb on hopes of successful debt ceiling outcome") stand-off that could tip the U.S. economy into recession. A scheduled meeting on Friday between U.S. President Joe Biden and [top lawmakers was postponed until early next week as the two sides seek a compromise to avoid](https://www.financedigest.com/security-and-compliance-must-be-top-priorities-to-avoid-fintech-failure.html "Security and compliance must be top priorities to avoid fintech failure") a catastrophic default. [German Finance Minister Christian Lindner said on Friday he hoped](https://www.financedigest.com/last-hope-eager-germans-are-prepared-to-pay-for-weight-loss-drug.html "“Last hope”: Eager Germans are prepared to pay for weight-loss drug") U.S. politicians would come to a “grown-up” decision on talks to raise the $31.4 trillion [debt ceiling](https://www.financedigest.com/wall-street-gains-dollar-climbs-on-solid-data-debt-ceiling-progress.html "Wall Street gains, dollar climbs on solid data, debt ceiling progress") – the maximum amount the U.S. government is authorised to borrow – warning there was a [risk to the global](https://www.financedigest.com/concern-over-us-default-risk-grips-global-markets-as-talks-resume.html "Concern over US default risk grips global markets as talks resume") economy if they did not. ## COUNTERING CHINA’S ‘ECONOMIC COERCION’ The United States is at the forefront in pushing for stronger steps against China. Treasury Secretary Janet Yellen said on Thursday many members of the G7 economies shared U.S. [concerns about China’s](https://www.financedigest.com/european-shares-climb-higher-oil-hit-by-china-demand-concerns.html "European shares climb higher; oil hit by China demand concerns") use of “economic coercion” against other countries, and were considering ways to counter such behaviour. Germany is increasingly wary of Chinaa as a strategic rival and has considered steps to reassess bilateral ties, but is [cautious of being seen as forging a G7 front against China](https://www.financedigest.com/richemont-cautious-on-china-growth-talks-on-ynap-drag-on.html "Richemont cautious on China growth, talks on YNAP drag on"). Preliminary data provided to Reuters showed Germany’s direct [investment in China continues](https://www.financedigest.com/onguard-continues-to-invest-in-uk-growth-strategy-with-latest-appointment.html "Onguard continues to invest in UK growth strategy with latest appointment") to rise even as its government wants to “derisk” their relationship with Beijing. While the G7 leaders’ summit next week could [see debate on implementing targeted controls on investments](https://www.financedigest.com/new-brexit-guide-surrenden-invest-helps-property-investors-see-past-politics.html "New Brexit Guide from Surrenden Invest helps property investors see past the politics") to China, any screening of investments would be targeted to strategically important areas, a German government source said on Thursday. The [discussions among the finance leaders](https://www.financedigest.com/eu-leaders-to-discuss-soaring-energy-prices.html "EU leaders to discuss soaring energy prices") will lay the groundwork for the summit in Hiroshima. Host Japan is cautious about the idea of outbound investment controls against China [given the huge impact it could have on global trade](https://www.financedigest.com/what-kind-of-legal-protection-are-trade-secrets-given-its-changing.html "What kind of legal protection are Trade Secrets given? It’s changing…") and its own economy. “Restricting outbound investment would be quite difficult,” said one of the officials, who spoke on condition of anonymity due to the sensitivity of the matter. British Finance Minister Jeremy Hunt told the Nikkei newspaper on Thursday the G7 must counter China’s economic coercion, though [made no mention of investment](https://www.financedigest.com/investing-blockchain-technologies-made-simple-new-quantatex-alternative-investment-account.html "Investing in Blockchain Technologies made simple with new Quantatex Alternative Investment Account") controls. ## SUPPLY CHAIN DIVERSIFICATION Another initiative to be endorsed by the G7 is to create partnerships with low and middle-income nations to diversify [supply chains](https://www.financedigest.com/the-internet-of-robotic-things-how-iot-and-robotics-are-evolving-to-benefit-the-supply-chain.html "The Internet of Robotic Things: How IoT and robotics are evolving to benefit the supply chain ") away from countries like China. Japan has invited six non-G7 countries, including Brazil, India and Indonesia, for an outreach meeting on Friday where [supply chain](https://www.financedigest.com/power-out-how-to-prevent-your-supply-chain-from-diving.html "Power Out: How to Prevent your Supply Chain from Diving") partnerships will be discussed. Analysts, however, are sceptical on how effective such steps to counter China would be. It’s very difficult to leave China out given its economic might,” said Toru Nishihama, chief emerging [market economist at Dai-ichi Life Research](https://www.financedigest.com/electromechanical-microwave-switch-market-to-surpass-valuation-of-us-1-6-bn-by-2030-transparency-market-research.html "Electromechanical Microwave Switch Market to Surpass Valuation of US$ 1.6 Bn by 2030: Transparency Market Research") Institute. Doing so could divide world trade, damage [global growth](https://www.financedigest.com/the-global-demand-of-motocross-gears-market-growth-analysis-latest-trends-and-forecast-till-2031.html "The Global Demand of Motocross Gears Market, Growth Analysis, Latest Trends and Forecast till 2031") and hurt G7 economies themselves. The G7 [finance leaders](https://www.financedigest.com/what-actions-can-business-leaders-in-the-finance-industry-take-to-improve-wellness.html "What actions can business leaders in the finance industry take to improve wellness?") are expected to issue a joint statement after their three-day meeting ends on Saturday. (Reporting by Leika Kihara, Andrea Shalal and Christian Kraemer, Additional reporting by Tetsushi Kajimoto and Takaya Yamaguchi in Niigata, Yoshifumi Takemoto in Tokyo; Editing by Kim Coghill and Alex Richardson) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---