China-West divide threatens ‘reversal’ for global economy, IMF official warns
- First deputy managing director of IMF says creation of trade blocs based on geopolitical relationships with China, US has been detrimental to global growth
- Recommends dialogue and an avoidance of worst-case scenarios, which would harm low-income countries most
With the world now divided among three broad blocs of countries – China-leaning, US-leaning, and nonaligned – both a “significant reversal of the gains from economic integration” and “a broad retreat from global rules of engagement” are on the horizon, said Gita Gopinath, the first deputy managing director of the financial agency.
Gopinath, who has often led annual audits of China’s financial system, made the remarks in a speech at Stanford University on Tuesday.
Her remarks come at a time of increased geopolitical uncertainty over a number of challenges, most notably an escalating rivalry between the US and China and the war in Ukraine.
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Although economic fragmentation is not yet as severe as it was during the Cold War, Gopinath said, it carries a much greater potential cost thanks to higher global reliance on trade.
