G7 summit turns to simmering tensions with China

BARI

G7 leaders meeting in Italy turn their attention to China on Friday, from security in the Asia-Pacific to how best to protect their industries while avoiding an outright trade war with Beijing.

After a first day dominated by Ukraine, U.S. President Joe Biden and the leaders of Japan, Italy, France, Germany, Canada and Britain opened the second day of their summit in Puglia with talks on migration.

But the key session comes before lunch, focusing on fair trade with the world's second-largest economy, notably on green technology.

Japanese Prime Minister Fumio Kishida was set to lead the talks, which officials said would also address North Korea and territorial disputes between China and its neighbours.

In addition, the Group of Seven rich democracies will be seeking a common response to China's alleged support of Russia's military expansion, which Washington says is fuelling the war in Ukraine.

"G7 countries are on the same page vis-a-vis China," a Japanese government source told AFP.

  'Non-market policies' 

Thursday's talks, attended by Ukrainian President Volodymr Zelensky, were marked by a strong show of G7 support for Kiev in its war with Russia, and the agreement of a $50-billion new loan.

But there were also tensions, with France and the United States criticising host Italy over its reported attempts to water down references to abortion access in the final summit statement.

The leaders began Friday's talks on a lighter note, singing "Happy Birthday" for German Chancellor Olaf Scholz, who turned 66 on Friday, a diplomatic source said.

The summit comes amid souring trade relations between China and the West, exemplified by the European Union's announcement this week of plans to impose new tariffs on Chinese electric vehicles.

Beijing denounced what it called "naked protectionist behaviour" and said it reserved the right to file a suit with the World Trade Organization (WTO).

The U.S., Japan and the EU — which attends G7 summits as an unofficial eighth partner — have all voiced concern over China's so-called "industrial overcapacity".

They say generous subsidies by Beijing, particularly in green energy and technology sectors such as solar panels and electric vehicles, result in unfairly cheap goods flooding the global market.

That excess capacity threatens Western companies struggling to compete, particularly in the growing green tech sector.

"We will confront China's non-market policies that are leading to harmful global spillovers," John Kirby, the U.S. National Security Council spokesman, told journalists ahead of the summit.

China has dismissed the concerns but Washington is pressing for a united G7 front.

The group's finance ministers warned last month that they would weigh steps to "ensure a level playing field" for all countries.

Another focus on Friday is China's recent restrictions on exports of minerals such as gallium, germanium and graphite, which are critical in industries such as telecommunications and electric vehicles.

The curbs threaten international supply chains, and there are fears they could be followed by restrictions on other materials such as rare earth elements crucial for electronics.

  Russia's war machine

The G7 leaders will also address security and defense concerns, including accusations Beijing has helped expand Russia's armed forces.

Biden on Thursday said the group had "agreed to taking collective action" against China's role in supplying Russia with "materials they need for their war machine".

Washington has accused Beijing of helping Russia's defense industry — and therefore its invasion of Ukraine — through joint production of drones and exports of machine tools needed for ballistic missiles.

At a joint press conference with Biden, Zelensky said he had spoken by phone to Chinese President Xi Jinping, who "gave me his word" that he would not sell weapons to Russia.

"We will see," Zelensky added.

On the agenda is also wider security in the Asia-Pacific, where China's confrontational tactics and militarisation of islands in the South China Sea — as well as its recent war games around self-ruled Taiwan — have increased fears of a potential conflict.

At the last G7 summit, in Japan, the leaders said in their final statement that they "oppose China's militarisation activities in the region".

The Japanese government source said it was crucial for the leaders in Puglia to send a clear message to Xi that the issue was not merely regional, but of concern to all the G7 nations.

"All the (G7) countries are aware that we need to convey the message very candidly to the Chinese at the very top level," the source said.