China warns G20 countries of risks in global economy

Chinese President Xi Jinping and US President Barack Obama shake hands during the G20 Summit in Hangzhou, Zhejiang province, China September 4, 2016. Pic: Reuters

China's President Xi Jinping said on Sunday at the opening of the G20 summit that risks are accumulating in the global economy from high leverage and that countries should take steps to boost trade and investment and avoid protectionism.

G20 countries should increase policy coordination and balance supply-side reform and demand management, Xi said during his address to other world leaders at the meeting in the eastern Chinese city of Hangzhou.

US President Barack Obama said on Sunday bilateral talks with China's Xi Jinping had been "extremely productive".

Some G20 leaders have already begun drawing battle lines in disputes over issues like trade and investment, tax policy, and industrial overcapacity.

Security is extremely tight in Hangzhou, with parts of the city of nine million people turned into a virtual ghost town as China seeks to ensure that the G20 summit is incident-free.

Obama, who arrived on Saturday, held talks with Xi that ran late into the night.

He urged Beijing to uphold its legal obligations in the disputed waters of the South China Sea, and stressed US commitments to its regional allies.

Xi said China would continue to safeguard its sovereignty and maritime rights in the South China Sea.

Obama brushed off his chaotic welcome at the Hangzhou airport where his staff argued with Chinese security over media access.

He was also not offered a staircase to disembark at the front of Air Force One, and staffers had to scramble to find an alternative exit.

On Saturday, Obama and Xi also ratified the Paris climate change agreement, setting the stage for other countries to follow and for the deal to come into effect possibly as early as before the year-end.

China is keen to keep the summit focused on economic issues and to prevent other disputes from overshadowing it.

Other leaders arriving for the summit in the eastern Chinese city of Hangzhou include Russia's Vladimir Putin, Japan's Shinzo Abe, Britain's Theresa May, Germany's Angela Merkel, France's Francois Hollande and India's Narendra Modi.

The leaders are likely to renew their promises to use tax and spending policies to invigorate the sluggish world economy, although a new pro-growth push was unlikely.

Overcapacity in the global steel industry, a sore point for China as the world's largest producer of the metal, barriers to foreign investment and the risk of currency devaluations to protect export markets will also figure in the discussions.

With the summit tucked in between Britain's vote to leave the European Union and the US presidential election, G20 leaders will also be keen to mount a defence of free trade and globalisation.

On Sunday, Xi held talks with Australian Prime Minister Malcolm Turnbull and told him he hoped Australia would continue to provide a fair, transparent and predictable policy environment for foreign investors.

China was angered when Australia blocked the A$10 billion ($7.7 billion) sale of the country's biggest energy grid to Chinese bidders last month.

China has accused Australia of bowing to protectionist sentiment in blocking the bid for Ausgrid, as well as an earlier one by a China-led consortium to buy cattle company Kidman & Co.

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