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Interview: Lagarde sees China's increasingly important role at IMF

English.news.cn   2014-03-22 00:38:38

by Xinhua writer Liu Jie, Fan Yu

WASHINGTON, March 21 (Xinhua) -- China has been playing an increasingly important and active role at the International Monetary Fund (IMF), a trend that is welcomed and commensurate with its remarkable achievements and growing economic strength and influence, IMF Managing Director Christine Lagarde said Thursday.

"In the period to come, China's influence in the global economy and role in global economic governance will continue to rise," Lagarde told Xinhua in an exclusive interview before her departure to Beijing for a forum on China's development.

"This will reflect, in part, the transformation of its economy through reforms outlined in the third plenum that would help rebalance the economy, and achieve higher quality and more sustainable growth," she said.

"This will also have positive implications for the rest of the world, and we are very much looking forward to these developments unfolding," she added.

Lagarde said China, as one of the IMF's biggest shareholders, will also become its third largest member once the institution's governance reforms, adopted in 2010, become effective.

Talking about the Chinese economy, she said, to achieve the transformation pursued by the Chinese leadership will require steadfast and timely implementation of the blueprint for reforms announced at the Third Plenum of the 18th Central Committee of the Communist Party of China last year.

While implementation may be challenging, success will yield significant benefits for both China and the world economy, she said.

"In the near term, containing risks will require reining in rapid credit growth and local government off-budget borrowing. Such stimulus policies have provided welcome support to China and the world economy since the global financial crisis," said the IMF chief.

However, while China still has significant buffers to weather shocks, the margins of safety are diminishing and a faster unwinding of the stimulus is thus warranted, she noted.

After a severe global financial crisis, the economic recovery is understandably weaker and it may take longer to return to growth potential. Although the direction is positive, the global growth is still too low, too fragile, and too uneven, Lagarde said.

She pointed out that market vulnerabilities in some emerging markets could interact with risks related to the unwinding of unconventional monetary policies in some advanced economies. New geopolitical risks could also threaten financial stability in some emerging economies.

In terms of how to navigate the possible bumpiness and stay strong, Lagarde suggested emerging economies implement credible macroeconomic policies and flexible exchange rates, which are central to weathering the turbulence, although specific policy priorities will vary depending on country circumstances.

For example, where inflation is relatively high, further monetary tightening in the context of strengthened policy frameworks may be necessary. In other cases, more decisive fiscal consolidation may be needed to shore up credibility. Policymakers must also stand ready to handle possible increases in financial stability risks.

She said emerging Asia remains a bright spot among the emerging economies, with China being a key driver.

On the IMF's reforms, Lagarde said the institution has certainly stood the test of time and has helped promote global financial stability and the linchpin of global prosperity.

But the global economy is going through momentous changes which call for a new multilateralism for a new era, she added.

"That means that institutions like the IMF must be brought fully up to date, and made fully representative of the changing dynamics of the global economy. This is why the IMF's governance reforms are so important, and we are working hard on that," she said.

Lagarde said the IMF should be able to serve all of its members as an objective and trusted advisor, seek to understand the complex interconnections that run through the global economy, and have necessary tools and enough resources to prevent and manage future crises.

"And, within our mandate, we must work more on issues like inequality and climate change -- collaborating with institutions that have a more specific remit in these areas," she said.

Editor: yan
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