The Group of Seven (G-7), comprised of the world’s top financial leaders, have pledged their allegiance to Ukraine while vowing to enforce sanctions against Russia for its aggression towards the country. The group issued a joint statement after three days of talks in Niigata, Japan, saying that they would bring inflation under control while aiding those who are suffering the most from surging prices. Moreover, they are committed to building more stable, diversified supply chains for developing clean energy sources and to “enhance economic resilience globally against various shocks.” However, their statement did not mention China’s economic coercion tactics, causing outrage from the country’s officials.
Given the immense stake most countries have in China’s rising power and economy, the Finance leaders were hesitant to overtly condemn their behaviours at the talks in Niigata, Japan. As the talks concluded, Japanese Prime Minister Fumio Kishida recorded that the international community is facing a historic turning point, with divisions and conflicts, including Russia’s invasion of Ukraine and Sudan.
At the upcoming summit of G-7 leaders in Hiroshima, which President Joe Biden is expected to attend despite a national crisis concerning the U.S. debt ceiling that could lead to a national default, the stakes for the global economy and the future look to be high. If not resolved, the situation would bring an economic catastrophe, destroying hundreds of thousands of jobs, and potentially disrupting financial markets across the globe. Treasury Secretary Janet Yellen warned that no mention of the matter was made at the finance leaders’ statement.
Although the G-7 economies comprise only tenth of the world’s population, about 30% of economic activity, this was down from roughly half 40 years ago. Developing economies such as China, India, and Brazil have made huge gains, raising questions regarding the relevance and role that the G-7 plays in leading the world economy – which relies increasingly on growth in less wealthy nations.
China has criticized the U.S. and other G-7 countries for claiming to protect a “rules-based international order” against “economic coercion” from Beijing and other threats, dismissing their being accused of the ‘economic coercion’ term as hypocrisy. The group was expected to voice confidence in the global financial system despite recent turmoil in the banking industry and the potential of a U.S. national debt default.
The host of the G-7 this year, Japan, was also seeking support from the finance leaders for developing a “partnership” to strengthen supply chains to reduce the risk of similar disruptions to those seen during the pandemic when supplies of items from medicines to high-tech computer chips ran short in many countries.
Tensions with China and with Russia; the country’s war on Ukraine have been a focus during the talks in Japan, the only Asian member of the G-7. The finance ministers and central bank chiefs of the G-7 have said that they want to discuss ways to prevent what they call “economic coercion” by China, drawing sharp retorts from Beijing. The Chinese Foreign Ministry spokesman, Wang Wenbin, said that China is a victim of economic coercion, and if any country should be criticized for economic coercion, it should be the United States.
China accuses the U.S. of hindering its rise as an increasingly affluent, modern nation through trade and investment restrictions. Yellen said these measures were narrowly targeted to protect American economic security. The G-7 finance ministers and central bank chiefs also pledged to work together within the G-7 and with other countries to enhance economic resilience globally against various shocks, notwithstanding standing firm to protect shared values and preserve economic efficiency in upholding the free, fair, and rules-based multilateral system.
