China’s major banks confirmed Monday that they will not attend the International Monetary Fund (IMF)-World Bank meeting that opens Tuesday in Tokyo.
The banks include the country’s four state-owned banks — the Industrial and Commercial Bank of China (ICBC), Bank of China, China Construction Bank, Agriculture Bank of China. The ICBC is the world’s largest lender by market value.
The banks’ decision was made after bilateral relations between China and Japan became strained, after the Japanese government announced its decision on Sept. 10 to “purchase” the Diaoyu Islands, which are China’s inherent territory, analysts said.
Japan’s move fueled anti-Japan protests in dozens of Chinese cities last month.
Damage to ties between the two Asian giants has been extensive. Trade, which reached a record of 342.9 billion U.S. dollars last year, has been affected. Many academic conferences and cultural exchanges were canceled and airlines have canceled flights due to low seat occupancy rates.
The banks’ decision is further evidence that the unilateral actions by Japan is freezing bilateral relations and now starting to weigh on the world’s economy, said Mei Xinyu, a researcher at the International Trade and Economic Cooperation Institution under China’s Ministry of Commerce.
The ties between the world’s second- and third-largest economies will definitely undermine the global economic operation and policy coordinations. This is because the two nations together make up about one fifth of the world’s economic output, Mei said.
With relations between the two nations at a low point, concerns are growing that the world’s economic recovery may be affected.
The shaky global economy needs Japan and China to be fully engaged, said IMF’s managing director Christine Lagarde. She warned that the world cannot afford the two countries to be in dispute.
The warning came as both the World Bank and Asian Development Bank slashed their growth estimates for the continent.
The dispute between the two countries has also put regional supply chains at risk. Both China and Japan are important sources of semi-manufactured goods in Asia, said Zhang Mo’nan, a researcher at the State Information Center, a government think tank. The ripple effect will spread and put pressure on the world economy.
The mistake made by Japan will exacerbate the already fragile global economic recovery, she said.