China to remain important engine for global economy

WASHINGTON -- As China is moving its economy to a more inclusive, environment-friendly, and sustainable growth path, the sustainability in the end will mean higher incomes in the country, with even larger gains in consumption and living standards -- a result good for both China and the rest of the world, IMF Managing Director Christine Lagarde has said.

Before her departure to Beijing, Lagarde told Xinhua in an exclusive interview that "my message during my visit is that I am convinced that our ongoing partnership will only grow stronger as we work together to foster prosperity and stability in China, the region, and the global economy."  

Sustainable growth path for China

As a frequent visitor to China, Lagarde said she loved the dynamism and vibrancy of its economy and society, with a constant impression of the optimism and pragmatism of its people, as well as strong collective commitment to a more open, modern and prosperous China.

China's economy faces rising vulnerabilities in a number of areas, including real estate, local government financing, and the financial system, she said.

"In the near term, the risks are manageable, thanks to a number of buffers, including high domestic savings, a strong external position, and a still-robust government balance sheet. However, timely and steadfast implementation of the reform agenda is needed both to prevent a further build-up of risks and put the economy on a sustainable growth path," Lagarde said.

Creating significant adjustment in many sectors of the economy, China's comprehensive package of reforms may result in somewhat slower growth in the near term but the costs will be more than offset by the benefits of much higher income over the medium term. From a global perspective, the benefits from stronger demand in China will result in higher global output over time, she said.

In regard to China's slower growth, the IMF chief said in an optimistic tone that the slower growth is still "twice the rate of global growth!" China has contributed one-third of global economic growth in the past seven years and is expected to remain an important engine for the global economy, she said.  

Confidence in emerging economies

Growth in emerging and developing economies (EMDEs) has slowed in recent years, which triggers doubts about their future sustainability. However, the IMF chief expressed her confidence in the EMDEs, saying they will continue to outpace that of advanced economies, though at a slower rate.

Lagarde said the share of emerging economies in global GDP will continue to increase, and much of the increase will be driven by the BRICS countries, in particular by China and India. According to the IMF, EMDEs share in global GDP adjusted by purchasing power is projected to rise from 57 percent in 2014 to about 60 percent in 2019.