The heads of the World Bank and IMF appealed Thursday to the U.S. and China to cool their dispute over technology policy and play by world trade rules, as tumbling share prices drove home potential perils from a clash between the world's two biggest economies.
Global economic growth is slowing but remains strong, Christine Lagarde, managing director of the International Monetary Fund, said on the sidelines of the IMF-World Bank annual meeting, being held this week on the Indonesian island of Bali.
Countries are mostly in a "strong position," she said, "which is why we believe we are not seeing what is referred to as 'contagion.'"
But the gyrations that rocked Wall Street the day before and Asia and Europe on Thursday, taking the Shanghai Composite index down 5.2 percent and Japan's Nikkei 225 nearly 4 percent, do partly reflect rising interest rates in the U.S. and some other countries and growing uncertainty over trade, she said.
"It's the combination of the two that is probably showing some of the tensions that we see in terms of indices, short-term indicators as well as possibly market volatility," Lagarde said.
The U.S. and Chinese exchanges of penalty tariffs in their dispute isn't helping, she said.
Her advice was threefold: "De-escalate. Fix the system. Don't break it."
She acknowledged that the World Trade Organization, based in Geneva, has made scant headway in recent years toward a global agreement on trade rules that can address issues like complaints over Chinese policies U.S. President Donald Trump says unfairly extract advanced technologies and put foreign companies at a disadvantage in a quest to dominate certain industries.
"Our strong recommendation is to escalate work for a world trade system that is stronger, that is fairer and is fit for the purpose," she said in opening remarks.
World Bank President Jim Yong Kim said the World Bank is working with developing countries to brace for a further deterioration.
"Trade is very critical because that is what has lifted people out of extreme poverty," Kim said. "I am a globalist. That is my job. That is our only chance of ending extreme poverty. We need more trade not less trade," he said.