Home 禄 Opinion 禄 Chinese Views
Brewing up a model to refresh the economy
Print Edition
LAO Tzu, an ancient Chinese sage, once famously said that administering a state is comparable to preparing a fish stew.
His point was that governing a state demands the same qualities of patience, balance and moderation required in making a tasty meal.
About 2,500 years later, a modern-day financial official adapted Lao Tzu鈥檚 aphorism, with her own take.
At a recent lecture commemorating the 30th anniversary of the founding of Fudan University鈥檚 School of Management, Christine Lagarde, managing director of the IMF, used tea making as a metaphor to illustrate what she thinks are the necessary ingredients for developing a better economy in 2015 and beyond.
鈥淲e鈥檙e still feeling that bitter aftertaste (more than six years after the global financial crisis), a sour taste that you feel when the tea has brewed for too long,鈥 said Lagarde, referring to the lingering legacies of the crisis.
Describing herself as a 鈥渢ea addict,鈥 she observed that it takes a set of factors to get the world economy back on track 鈥 鈥渋ngredients,鈥 鈥渄iscipline,鈥 鈥渢iming鈥 and 鈥渇ocus鈥 鈥 exactly the elements required to brew a good, strong cup of tea.
Lagarde says that the world economy has been weighed down a 鈥渓ittle bit鈥 by low growth, high debt and high unemployment, which combined to exert pressure on the IMF to lower its forecasts for global economic growth to 3.5 percent for 2015 and 3.7 percent for 2016.
And a host of risks threaten to cast a pall of uncertainty over the economic future. According to Lagarde, the US monetary tightening, the scheduled volume or pace of which was not yet defined, might trigger excessive volatility in global financial markets.
Other risks abound.
A stronger US dollar doesn鈥檛 augur well for countries that have borrowed heavily in dollar-denominated loans, which portend debt crises; the 鈥渓ow-low鈥 situation plaguing the eurozone and Japan, meaning low inflation and low growth; geopolitical risks such as conflicts and disasters. They can all affect a nation鈥檚 economic prospects, and warrant a strong policy 鈥渞ecipe鈥.
Lagarde鈥檚 recipe
Lagarde鈥檚 鈥渞ecipe鈥 is structural reform, which means different things to different nations.
鈥淔or some countries, it could be significant investments in infrastructure; for some it could be pressing ahead with trade liberalization or reforms in education, health care and social security net; for some it could be deregulating the labor or service market,鈥 she said.
She went on, explaining that 鈥渢he base we have for policy-making 鈥 just as Darjeeling was to my mother鈥檚 tea 鈥 is structural reform.鈥 One needs to look no further than China to realize how important structural reform is for a country鈥檚 economic fortunes.
The taste of China鈥檚 new cup of economic 鈥渢ea鈥 will depend on the results of the ongoing structural reform.
For a long time, the ability to 鈥渞einvent itself鈥 has been China鈥檚 secret to its successful transformation from an inward-looking economy to a much more open economy, Lagarde noted.
Biggest challenge
The biggest challenge for China鈥檚 economy, as she saw it, is not to fall into the middle-income trap, since it officially aspires to the status of a middle-income country by 2030.
鈥淭his is why China inaugurated key structural reforms to lift incomes and living standards in the long term. This reform will hopefully lead to new norms of slower, safer, and more sustainable growth that is desirable,鈥 she said.
It is against this background that the IMF forecast GDP growth for China this year at 6.8 percent, about half a percentage point less than last year, said Lagarde.
鈥淚 think it is OK, because it is good for China and its people, and is good for the world.
鈥淏y having an economic cup of tea more slowly, China will end up with a richer taste,鈥 Lagarde told the audience.
A typical example of this tempered growth is the slowing of credit expansion over the past few months, which has helped contain financial vulnerability.
In addition to the ambitious market-oriented reform outlined in the third plenum of the 18th Party Congress, the former French finance minister urges greater competition in sectors such as finance, education, health, telecommunications and logistics.
鈥淭hose are sectors where... once the obstacles are being removed, the barrier to entry is low鈥 to young, entrepreneurial minds.
Talking of deepening reform, especially in terms of financial deregulation, Lagarde said maintaining the reform momentum will be 鈥渆ssential,鈥 and this means 鈥渢aking further steps to liberalize the deposit rates and exchange rates... removing implicit government guarantees, especially for state-owned enterprises... developing a greater tolerance of corporate default, to create more room for healthy companies to thrive and access credit.鈥
Like those before her, she warned of the danger of embracing growth that comes at a price, namely, worsening environmental damages and rising income inequality.
鈥淭his is why China is moving toward a developing model that will generate, hopefully, greener, more inclusive and more widely shared growth,鈥 she said.
- About Us
- |
- Terms of Use
- |
-
RSS - |
- Privacy Policy
- |
- Contact Us
- |
- Shanghai Call Center: 962288
- |
- Tip-off hotline: 52920043
- 娌狪CP璇侊細娌狪CP澶05050403鍙-1
- |
- 浜掕仈缃戞柊闂讳俊鎭湇鍔¤鍙瘉锛31120180004
- |
- 缃戠粶瑙嗗惉璁稿彲璇侊細0909346
- |
- 骞挎挱鐢佃鑺傜洰鍒朵綔璁稿彲璇侊細娌瓧绗354鍙
- |
- 澧炲肩數淇′笟鍔＄粡钀ヨ鍙瘉锛氭勃B2-20120012
Copyright 漏 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.
