Asia to be center of global growth: IMF Special Advisor

12:25, June 16, 2010      

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Asia has been leading recovery of the world economy and will continue to play a more important role in the new world economic order, according to Min Zhu, Special Advisor to the International Monetary Fund's Managing Director.

ASIAN ECONOMY HAS BRIGHTER FUTURE

"Asia is obviously becoming more and more important in the global economy," Zhu said in a recent interview by the IMF's External Department released on Tuesday. "The center of growth is moving from the West to Asia, and in particular emerging Asia. I think that's a pattern that will continue for at least the next five years, which will change the whole global economic structure. "

In 2009, the United States' economy shrank 2.4 percent and European economy contracted 4.8 percent. But India grew 7.3 percent, and China increased 8.7 percent.

Zhu, who was most recently Deputy Governor of the People's Bank of China, China's central bank, is now the highest rank official who comes from China in the Washington-based international financial institution. He also had more than a decade of commercial banking experience as a senior executive at the Bank of China.

Zhu noted that another important change for Asia is its role in world trade. He said that because the crisis started in the advanced economies, trade flows from Asia to the advanced economies fell dramatically. In response, the region further strengthened intraregional trade flows.

"Looking forward, I believe we will see trade flows among the developing countries and emerging economies growing dramatically, and emerging Asia becoming the centerpiece of a whole new global trade pattern."

Because emerging Asia has strong growth, and advanced economies are experiencing rather weak growth, there is a multi-level, multi- speed recovery. Moreover, emerging Asia had much sounder financial situations, while the advanced economies are experiencing fiscal difficulties. "So we can expect global assets to relocate, with Asia attracting more capital," he said.

"When these elements are combined, Asia will move more to the center of tomorrow's global economy," Zhu added.

BIG CHALLENGES AHEAD

Although the assessment of Asian economy is relatively optimistic, Zhu acknowledged that big challenges remain for the region.

"I am optimistic about Asia's future and its growth prospects. But that doesn't mean everything is fine for Asia. Indeed, Asia is facing a lot of challenges," he said.

"The recent crisis tells us that Asia is not isolated; it really is part of the global economy and finance. You see how much trade shrunk in the first quarter of 2009. You see how much capital fled in the fourth quarter of 2008. That tells Asia there are a lot of things it needs to do."

In this regard, Zhu made three pieces of recommendation to policy makers.

First, Asia needs to rethink its growth model. Asia still very much has an export-driven growth model. "But we need to move forward to a domestic consumption-driven model to make growth much more balanced and sustainable."

A second issue is financial sector reform. He said that "the crisis taught us that a strong financial sector -- which Asia does not have yet -- plays a very important role in macroeconomic management." For example, Asia does not have a deep bond market, which is absolutely important for long-term financing. Asia has been working on that for years, but there is much more to be done.

Third, Asia needs to deal with global capital flows. The surge in capital flows to emerging Asia presents big challenges for the region, particularly in 2010 and for the next few years. The Asian economies need to handle this issue very carefully and design proper policies to bring lasting solutions.

IMF NEEDS TO UNDERSTAND ASIA AND CHINA BETTER

As Asia, especially China, is playing a bigger role in the world economy, many people believe that China's role is not properly reflected in the IMF currently.

"Most people's first response would be the quota and voice reform that is currently under way, to reflect the growing role of Asia and China," Zhu said. "It is right to give China and Asia more status within the institution. But more important is for the IMF to understand Asia and China better and to bring Asia's and China's experience to the rest of the world."

"Why is Asia so successful?" Zhu said. "Asia has its own experience and its own stories. There is a role for the IMF to play in bringing that experience to other emerging economies, and maybe to other advanced economies as well."

Besides, he believes that the IMF can and should bring Asia and China to the global platform to ask them to participate in the global policy formation process.

Source: Xinhua

(Editor:张心意)

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