Chinese authorities now appear to be doing just that. In the 1930s, many countries resorted to devaluations, tariff barriers and regulation of crossborder capital movements to protect their own manufacturing industry. But this was the wrong medicine. World trade fell, and the international division of labour went into reverse. This led to lower income for everyone. In his letter to The Times, Hayek made the following comment: “.... the right way [...] to proceed is [...] to abolish those restrictions on trade and the free movement of capital which are at the present impeding even the beginning of recovery.” Today, the global system of trade and cross-border investment is again under pressure. In both Europe and the US, influential groups have argued in favour of erecting new walls and barriers to the international exchange of goods. This is a recipe for yet another downturn. Norway is a small open economy with substantial wealth invested abroad. As a nation, we are completely dependent on a functioning international system of free trade and investment. In the short term, major economies have less to lose from closing themselves off. We trust that they will not, after all, abandon the global economic system that has been built up over the past 70 years. Hayek or Keynes? The current situation on our continent – Europe – has much in common with the 1930s.
Ravi Menon: Chongqing-Singapore co-operation in green finance Keynote address by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the Singapore-China (Chongqing) Financial Summit, Singapore, 20 April 2023. *** Party Secretary Yuan, Minister Teo, Governor Huang, Mayor Hu, colleagues from China and ASEAN, ladies and gentlemen, good afternoon. Welcome to the fifth Financial Summit of the Singapore-China (Chongqing) Connectivity Initiative, or CCI. I thank the Chongqing Municipal People's Government for hosting this event, with such impressive efficiency and warm hospitality. On a personal note, I am very happy to be back in Chongqing after more than three years. The city is even more vibrant and beautiful than when I last saw it. Our gathering today comes at a challenging juncture for the global economy. According to the latest IMF World Economic Outlook, global economic activity is experiencing a broad-based slowdown, with core inflation persistently higher than seen in several decades. The global financial system is undergoing a tenuous adjustment to the new era of higher interest rates, as shown by recent stresses in the banking sector. These macro-financial developments make for a fragile global economy. If recent banking stresses lead to an aggressive pullback of credit, it will further drag down an already slowing global economy. The risk is of a potentially destabilising dynamic, where slower growth weakens credit quality and asset prices, thereby further exacerbating financial system vulnerabilities. Central banks need to stay focused on bringing down inflation.