IMF: China Has Key Role In Global Recovery

Add as your preferred news source on Google

Add Now

China will help to lead the world out of recession and also has a critical role to play in reforming the global economy, International Monetary Fund Managing Director Dominique Strauss-Kahn said on Monday.

Speaking at the International Finance Forum in Beijing, Strauss-Kahn also called on China to allow its currency to appreciate in order to bolster its economy, calling it a necessary reform.

"Allowing the renminbi and other Asian currencies to rise would help increase the purchasing power of households, raise the labor share of income, and provide the right incentives to reorient investment," Strauss-Kahn said in prepared remarks. "Higher Chinese domestic demand, along with higher US saving, will help rebalance world demand and assure a healthier global economy for us all."

The IMF projects China to grow at 8.5 percent in 2009 and at 9 percent in 2010, greatly exceeding average global growth rates.

"This performance is in keeping with China's remarkable achievements over the last generation," Strauss-Kahn said. "China's role in the international policy debate has been rising in tandem with its growing economy. As a key member of the G20, China is helping to design the global priorities for the future and devise solutions to global problems."

Strauss-Kahn said that while the global economy is improving, the recovery remains fragile — and policymakers should keep supportive measures in place until recovery is firmly established and unemployment is declining. In China, he said that the government's commitment to maintain fiscal stimulus into 2010 will be important for supporting growth.

He added that countries with large current account deficits should increase national saving, while nations with large current account surpluses ought to try to develop increased domestic demand.

"Higher Chinese domestic demand, along with higher U.S. saving, will help rebalance world demand and assure a healthier global economy for us all," Strauss-Kahn said. "China's leadership has already articulated a clear vision for how to boost private consumption. Consumer spending is growing faster than the economy as a whole."

There have been a number of proposals for how to improve the international monetary system, Strauss-Kahn said, including some from prominent figures in China. He said that the current system had proven resilient during the recent crisis and he expected the dollar to "remain the principal reserve currency for some time."

At the same time, he saw the need for strengthening global financial insurance measures and he said that the IMF could play the role of "global lender of last resort."

The transformation of the G20 into a key forum for fostering the international policy dialogue is a historic development, Strauss-Kahn said. He also noted that recent reforms undertaken by the IMF would raise Asia's quota representation in the institution to about 19 percent—with further increases expected by 2011.

"The world order is changing," he said. "Asia will play a vital part in making the most of this historic opportunity. And China, no doubt, will play a leadership role in making the changes needed to embark on a new growth path that secures long-term economic success for all nations."

For comments and feedback contact: editorial@rttnews.com