The Group of Seven (G7) nations have restated their willingness to continue big investments in China, even as they limit risky exposure to the world’s second-largest economy. Speaking during the G7 summit in Hiroshima, Germany’s Chancellor Olaf Scholz confirmed that China would continue to be the focus of permanent supply chains, exports and investment, while the countries in the G7 worked to manage their risk exposure. The meeting comes amid renewed discussion on economic issues related to China, including “economic coercion and lending practices.” However, G7 nations have emphasized that, while risk exposure needs to be managed, there is no interest in curtailing the growth of China.
The G7 is an organisation that comprises of Canada, France, Germany, Italy, Japan, the UK and the US. The G7’s mandate is to promote cooperation between member states on issues of international concern, including economic, security and foreign policy. China’s growing economic power means it now has the potential to cause economic instability globally. Over the past decade, world leaders have become increasingly concerned about China’s rise as an economic power that sets the course for international trade, with its influence often heavily impacting on domestic markets. For this reason, discussions at the G7 summit included the issue of China’s role in the global economy.
China’s rapid economic growth has been a central topic at international summits, with some countries increasingly viewing the growth of the Chinese economy as a strategic threat. Chinese officials have repeatedly countered by stating that the country’s economic aims are peaceful and focused on economic growth through international cooperation.
Despite any concerns, global investors continue to flock to Beijing. In January 2022, China’s foreign exchange reserves rose for the sixth consecutive month, with increasing confidence in the nation’s ability to weather the ongoing economic storm. The country has experienced issues around its domestic banking sector, with many investors growing fed up with corruption and “shadow banking” activities. However, despite these issues, there is still a sense within the financial markets that China remains an attractive investment location, with many multinational corporations still placing heavy emphasis on their operations within the country.
The G7 summit focused on a range of issues, including environmental challenges and gender equality, with many important pledges being made. However, for businesses, the focus is likely to remain on the global economy’s stability. Concerns remain about the potential impact of China upon the wider world economic system. The G7’s willingness to continue investing in China suggests its commitment to working with the country remains strong and a focus on economic partnership is expected to continue. While caution must be exercised, it is clear the G7 recognizes the importance of working with China and continuing to build strong relationships that will continue to underpin the global economic landscape.
