While acknowledging China’s support for globalization, IMF First Deputy Managing Director David Lipton said at Asian Financial Forum—held during Jan 15-16 in Hong Kong—that China should be open to look at its own restrictions on trade and investment.
Lipton added that also means protecting intellectual property rights and reducing the distortions of industrial policy, overcapacity, and policies that favor state enterprises.
“China has been a voice of reason in the debate over trade and economic integration. This support for globalization—proclaimed a year ago, by President Xi Jinping at Davos—is constructive and valuable, especially at a time when many in advanced economies are expressing doubts,” he said.
“At the same time, we believe that effective and credible leadership in support of globalization also requires a willingness to recognize and address one’s own shortcomings. That means China should be open to look at its own restrictions on trade and investment, which have generated criticism from some trading partners,” he added.
According to IMF figures, China is a key partner for more than 100 countries: countries that represent 80% of global GDP.
Key challenges facing China
Speaking at the event, Lipton also pointed out key challenges facing China.
The key challenge now for China is to ensure that its role generating growth and financing remains on a path that benefits the global economy—and itself, he said. “We can ill afford a world preoccupied with uncertainty about China’s future,” he noted.
While acknowledging China’s considerable progress in reining in credit growth and tightening oversight of some lending practices, Lipton said the country needs to ensure financial stability while refraining from undermining its extraordinary economic and social progress.
As better globalization is in China’s own interest, there is no guarantee that it will continue unabated when development and new technology change patterns of competitiveness, he said.
“China needs to be alert to the discontent with globalization as it is currently configured and support a global economic order for the future that will be widely embraced,” Lipton advised.
China can help prevent a new debt crisis
While developing countries benefit from funds provided by China to develop their infrastructure, some developing countries may face unsustainable debt burdens if recent lending trends continue, he said.
“The Chinese government and its lenders have begun considering the benefits of strengthened frameworks for debt resolution that could be used if needed,” Lipton observed. “We believe it’s urgent to establish such frameworks and work cooperatively to ensure that the developing world does not face a new debt crisis.”
According to IMF, Chinese lending represents 25 to 30% of GDP in some recipient countries.