China’s Next Transformation: the Key Steps Forward
Keynote Speech at China Development Forum
By Christine Lagarde
Managing Director, International Monetary Fund
Beijing, China, March 24, 2014
As prepared for delivery
Welcome. Huān Yíng. Good afternoon (Xia Wu Hao, 下午好).
It is a great honor to be invited to speak at the 2014 China Development Forum.
I would like to thank Minister LI Wei, Director of the Development Research Center of the State Council, and Mr. LU Mai, Secretary General of the China Development Research Foundation for their warm welcome to the forum.
I would also like to pay tribute to the chair of this luncheon session, Mr. NING Jizhe, Director of Research Office of the State Council, and my fellow speaker, Mr. SHANG Fulin, Chairman of China Banking Regulatory Commission.
I have been coming to China now for some 20 years—and yet I never cease to be amazed to find it always changing, always rejuvenating, always striving to fulfill the “Chinese Dream”, as President Xi Jinping has put it.
I have been coming to China now for some 20 years过去二十年我多次来到中国。这个动作在过去一直发生。
The IMF has been China’s partner in this quest. In fact, the Fund marks its 70th anniversary this year and it is worth recalling that China was one of our founding members. We have travelled far together.
in this quest在这个追求中，在这个征途中
We have travelled far together.我们在一起走过漫长的道路。//我们一直以来一路同行。
It is hard to believe but, back in 1944, the IMF had only 35 member countries who struggled to rebuild a global economy torn apart by war.
Today, we have 188 members, with countries now interconnected globally in myriad ways. In the process, the IMF has been transformed into a premier institution for international economic cooperation.
Of course, China has also been transformed: today it is the world’s largest trading nation; the world’s second-largest economy; and with a record in poverty reduction that is unparalleled in human history.
The IMF, with our global experience and technical expertise, has supported China in this great endeavor. In turn, we have benefitted—and learned—from China’s achievements.
Today, China stands on the threshold of its next historic transformation–one that will propel it on a trajectory of even higher quality and more sustainable growth. And a trajectory of even greater global leadership.
In that context, I would like to discuss three issues:
• First, the current state of the global economy and the implications for China.
• Second, the key policy steps in achieving China’s next transformation.
• Third, China’s global role in the 21st century—and what it means for the world.
1. The Current State of the Global Economy
First, the global economy. We will be releasing our updated forecasts in a few weeks, so today I will touch only on some broad trends.
Overall, global prospects are improving. The world economy is slowly turning the corner, although growth remains too weak and too unbalanced. In January, we projected global activity to strengthen from 3 percent in 2013 to about 3.7 percent in 2014—largely driven by improvements in the advanced economies.
Activity in emerging market and developing economies picked up slightly in the latter part of 2013, driven by stronger external demand from advanced economies. Although tighter external financial conditions will be a drag on domestic demand, emerging Asia will continue to be a bright spot, posting the highest growth rate of about 6.7 percent this year and next. China will continue to be a key driver of this momentum, albeit with lower but more sustainable growth rates.
Among the advanced economies, growth will be strongest in the United States, supported by robust private demand. Even so, it will be critical to continue to manage carefully the withdrawal of monetary support and to address medium-term fiscal uncertainty.
In the euro area, a modest recovery is taking hold—stronger in the core countries, but weaker in the South. Progress on banking union in recent days is encouraging and we look forward to further implementation –which is essential for a durable recovery.
In Japan, private investment and exports are seeing a boost from the monetary “arrow” of Abenomics. But for growth to be sustained, we need all “three arrows” to be fired—including a medium-term fiscal plan and structural reforms.
Overall, even as global prospects slowly strengthen, the specter of some old risks remain: incomplete financial sector reform, large debt burdens, increasing inequality and unacceptably high unemployment.
At the same time, we see some new risks appearing. Let me mention two in particular:
• Number one, in the advanced economies—particularly in the euro area—the risk of prolonged low inflation islooming and needs to be appropriately addressed, including through unconventional monetary policies as needed.
• Number two, in emerging market economies, there is a risk of heightened market volatility associated with thetapering of monetary policy in the advanced economies. Given that countries with larger domestic and external imbalances are likely to be more affected, strong macroeconomic policy responses on their part will be key—as will continued clear communication and cooperation among all parties concerned.
What does this mean for China?
China has clearly emerged as a stabilizing force in the global economy. In fact, China accounted for more than a third of total global growth over the past five years—and for almost half of the emerging and developing economies’ growth.
Going forward, a strengthening global economy will help China’s economy—and help maintain its leadership role in many areas of business, trade, and finance. But to sustain that role—and to enhance it—further important policy steps will be needed.
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