Sovereign debt, AI and Ukraine crowd out China at IMF annual meetings

The world’s finance chiefs spent last week in Bangkok debating the biggest risk facing the global economy — with debt, artificial intelligence and trade imbalances topping the list. Meanwhile, China, long a main risk factor in these discussions, was no longer at the top of the worry list.

The Bangkok meetings were the first in Asia since 2018, when the gathering was held in Bali, Indonesia. Thailand last hosted in 1991, six years before the unpegging of the baht from the U.S. dollar set off the Asian financial crisis.

Fast-forward to 2026, and anything from global imbalances to the AI boom or a massive debt buildup in the “Global North” could trigger the next financial crisis, said Kevin Gallagher, director of Boston University’s Global Development Policy Center, who spoke with reporters in Beijing after attending the IMF and World Bank meetings.

The IMF was upbeat on economies positioned to benefit from the global AI supply chain, such as South Korea, Japan and China, and downbeat on those that aren’t, warning that the AI build-out is widening gaps between economies.

AI-related borrowing is also pushing up debt levels and competing with governments for capital, which lifts borrowing costs further. The IMF warned that should AI technology fail to deliver the promised productivity gains, it could trigger severe global economic consequences.

Gallagher said he’s watching whether the IMF, the Federal Reserve and People’s Bank of China can coordinate, or end up going in different directions and “make things worse.”

The U.S. Treasury is at odds with the Fund over its own debt. IMF Managing Director Kristalina Georgieva said strong growth alone won’t put the U.S. on a sustainable path, with federal debt above $40 trillion. David Zervos, a counselor to Treasury Secretary Scott Bessent, dismissed the warning. “It’s good to remember how messy their forecasts have been in the past,” he said. “So take it all with a grain of salt.”

There were also few signs of coordination. Chinese and U.S. finance officials were seated at a distance at Thursday’s G20 finance ministers’ and central bank governors’ meeting in Bangkok, according to a layout seen by CNBC.

Chinese central bank Governor Pan Gongsheng told the International Monetary and Financial Committee Saturday that China supports stronger Fund monitoring of spillovers from “major advanced economies’ fiscal risks.” He said countries should address their own fiscal deficits, while those running surpluses should boost consumption and investment.

Russia and Ukraine returned as a central focus of the week’s meetings as tensions flared. Russian officials were also back in the room at a G20 finance chiefs’ meeting on the margins of the IMF gathering last Thursday.

Finance Minister Anton Siluanov attended in person for the second time this year, after an August G20 session in Asheville, North Carolina, drew harsh criticism from European leaders that forced him out of participating in a group photo.

German finance minister Lars Klingbeil reiterated his discontent over the Russian delegation’s presence, saying in a statement to CNBC that “pretending that Russia’s returning as a normal member of the G20 and sitting at the table again — that won’t happen with me, and it won’t happen with the other Europeans either.”

Nearly half of IMFC delegates walked out of the room when Siluanov was addressing the group in Russian on Saturday. Ukraine’s central bank chief, Andriy Pyshnyi, told Reuters that he was surprised by the large number of finance officials who expressed solidarity with Ukraine, calling it a “deep and emotional moment.”

After a three-hour meeting Thursday evening, the Group of Seven announced 260 million euros ($300 million) in funding for Ukraine to repair infrastructure at the Chornobyl nuclear power plant, and expect to bring that to 500 million euros — which would pay for the whole project — at a donor conference in Paris next month.

The IMF has warned that rising public debt is squeezing governments’ room to spend on priorities such as defense.

China featured prominently during the IMF meeting in 2018 as the U.S.-China trade war was just kicking off. But this year, panels and interviews had little to say about the country.

Tim Adams, president and CEO of the Washington, D.C.-based Institute of International Finance, said China has rarely come up in his conversations during recent visits to Singapore and Bangkok.

“We would have had a long discussion about U.S.-China relations, China’s impact on the [exports] shock 2.0 in Europe, and China’s impact on global trade and global manufacturing. [But] actually, we’ve had very little of that,” Adams told CNBC in an interview Friday.

The reason, he said: U.S.-China relations appear to have reached “some sense of stability,” leading investors to pare back worries about China as a risk.

“The perception is that the relationship is stable and solid, without much visible tension beyond the nagging set of issues that have been around for some time,” Adams said.

Investors remain reluctant to commit direct investment to the country, he said, but are keen on Chinese tech IPOs in the pipeline. He also cited a real appetite for Chinese bonds, with the currency stable to slightly stronger.

“It seems just more of a standard normal assessment, like China is any other risk rather than something unique and special,” Adams said.

— CNBC’s Penny Chen contributed to this report.