Protectionism won't solve debt woes, minister warns

One of China's top ministers yesterday warned foreign governments against imposing protectionist measures following the recent political and economic upheavals in Greece and other western economies.

Transport Minister Li Shenglin said any form of 'trade protectionism would bring a negative impact on industry and would not be conductive to the development of economy and trade'.

The global economy was also heading for a 'new round of turbulence' Li told about 900 delegates to the World Shipping (China) summit, organised by China Ocean Shipping (Group), at Boao on Hainan Island yesterday.

While not specifically mentioning Greece, Li's comments came two days after Greek Prime Minister George Papandreou sparked a mixture of disbelief and anger after calling for a public referendum on whether to accept a Euro130 billion (HK$1.4 trillion) rescue package agreed to last week.

Papandreou's own position as premier was under threat yesterday as French and German leaders said no bailout money would be given to Greece unless austerity measures were agreed upon.

Without the initial tranche of Euro8 billion, Athens is unlikely to be able to pay pensions and public sector workers next month.

Li said that while the world economy was undergoing a slow recovery, developing and developed economies had differing concerns. He said the major issue facing emerging economies was inflation, while slow growth, unemployment and high risk sovereign debt weighed on developed nations.

This view was shared by Captain Wei Jiafu, the chairman of China Ocean Shipping (Group), who said differences were emerging in the world economy and trade between developed and developing markets. These had created imbalances in the flow of trade and capital flows, which were now heading from emerging markets back to developed economies. Meanwhile, conflicting monetary policies meant some nations were tightening controls while others loosened.

But a brighter note was sounded by Dong Tao, managing director of Credit Suisse, who doubted there would be a double-dip recession despite the problems facing Euro zone economies.

'Emerging markets are the driving force [in the global economy]. US consumption is better than last year,' Dong said.

Hans Smits, president of the Port of Rotterdam Authority, said the approach taken by European bureaucrats over the sovereign debt crisis in several European countries was 'too little, too late'.

'We have to change the corporate governance of the European Union; we have to reform decision making,' the former banker and transport ministry secretary general said.

Avoiding direct criticism of nations like Greece and Italy, he said the European Commission should have stronger powers to discipline countries, while the European Central Bank should take a much bigger role.