I am delighted to be back in China this week for a high-level seminar in Nanjing on the international monetary system. Every time I come to this part of the world, I am impressed by the dynamism of the economies and the optimism of the people. The future is here.
The region's economic performance over the past few decades has been nothing short of remarkable. Asia now accounts for about a third of the global economy, up from under just a fifth in 1980. This trend has been reinforced by the crisis, with the emerging market powerhouses leading the global recovery.
Asia has also made tremendous progress with poverty reduction. China alone has pulled hundreds of millions of people out of poverty over the past few decades. Such a feat has never before been accomplished in the history of human civilization.
But to sustain this progress, Asia needs to grapple with numerous challenges today, among them the need to deal with overheating pressures and volatile capital inflows. And this relates directly to our discussion at Nanjing.
The current international monetary system has certainly delivered a lot. But it also has flaws that need to be fixed, especially if the next phase of globalization is to succeed in bringing a strong and broad-based rise in living standards.
I see four pressing issues:
- Imbalances across and within countries. We need stronger cooperation to promote effective global adjustment and discourage countries from running policies that lead to global imbalances. The G20 Mutual Assessment Process and the IMF's "spillover reports" for the five most important systemic economies -- which look at the effects of country policies across their borders -- are steps in the right direction. More ambitious ideas, including a strengthening of countries' multilateral obligations and of accountability mechanisms for these, are also worth discussing.
The Nanjing meeting was a useful step toward the international monetary system of the future. And speaking as the head of the IMF, it was also a useful step in advancing the partnership between Asia and the Fund -- a partnership that I firmly believe will continue to strengthen in the future.
From iMFdirect blog.