Press Release No. 08/26

Press Release: Statement by IMF Managing Director Dominique Strauss-Kahn at the Conclusion of his Visit to China

February 15, 2008

Mr. Dominique Strauss-Kahn, Managing Director of the International Monetary Fund (IMF), issued the following statement today in Beijing:

"It has been a great pleasure for me to make my first visit to China as IMF Managing Director.

"During this visit, I have had the privilege of holding a valuable discussion with Premier Wen Jiabao. I have also held fruitful discussions with Commerce Minister Chen Deming, Finance Minister Xie Xuren, and People's Bank of China Governor Zhou Xiaochuan. In addition, I met China Development Bank (CDB) Governor Chen Yuan. We signed a Memorandum of Understanding to enhance our partnership in promoting international economic cooperation, growth, and development, particularly in low-income countries. We will also conduct joint research, and the CDB will support the IMF's technical assistance to low-income countries.

"Concerns about the current prospects for the global economy were at the center of our discussions. The current financial crisis, which began in the United States housing market, is spreading to affect the real economy in the U.S. and elsewhere. There will be some impact on China, but we still expect the economy to expand by 10 percent this year.

"Nevertheless, China faces a number of challenges in sustaining its strong economic performance. Most immediately, the priority is recovery from the effects of the recent severe winter storms that disrupted much of the country and caused a tragic loss of life. I would like to offer my sympathy to all those affected. The Chinese government is also confronting several macroeconomic policy challenges, including preventing inflation—largely the result of food price increases in recent months—from becoming entrenched, and rebalancing growth away from heavy reliance on exports and investment toward consumption. Addressing social inequalities and improving energy efficiency are also priorities.

"We agreed that continued tight monetary policy will be important in containing investment growth and inflationary pressures. The government's emphasis on reorienting the budget toward improving social services—including health and education programs—can also help both to reduce disparities and rebalance growth. In addition, we also see the government's focus on financial sector reforms as key for achieving these goals. We welcome the decision to participate in the IMF's Financial Sector Assessment Program.

"On exchange rate policy, we welcome the authorities' objective of allowing greater flexibility over time. However, we encourage a faster pace of appreciation that would be helpful for addressing China's key economic challenges and would also contribute to preserving global economic stability.

"Our discussions also covered the ongoing reforms of the IMF, including the development of a new income model and quota and voice reforms. I am grateful for the Chinese government's support for these reforms.

"The international community is facing a challenging period ahead as the global economy and financial markets adjust to the recent turbulence and policymakers work to preserve economic and financial stability. I am confident from my discussions here in Beijing that China will play a role in this effort commensurate with its growing importance in the world economy."