Speech

New Challenges, New Ideas, New Actions

June 23, 2021

Distinguished guests:

I’d like to thank Caixin for inviting me to participate today. I am very glad to meet you all by video and would like to take this opportunity, on behalf of the International Monetary Fund (IMF), to offer my warm wishes for a successful Caixin Summer Summit 2021!

Given the summit’s theme – “Recovery of the Global Economy: Challenges and Solutions” – I would like to talk about what we need to do to turn the corner on the pandemic, and also what what we see as the key policy issues in facing the global challenge of climate change.

First, I would like to emphasize that, in the view of the IMF, the most urgent task to bring about global recovery quickly is for all countries to move proactively to complete vaccination efforts as early as possible. Simply put, vaccine policy is the most important economic policy at the moment.

Since the beginning of the year, the global economy has gradually stabilized and begun the march toward full recovery, bolstered by substantial policy support as well as vaccine availability, particularly among advanced economies.

The extent and pace of economic recovery are, however, uneven across countries, and the road to full recovery is fraught with uncertainty. The increasingly two-track pandemic is leading to a two-track recovery, which is detrimental to global prosperity. Economies with slower vaccine rollout, more limited policy support, and more reliance on contact-dependent sectors like tourism are recovering less rapidly. At the same time, as some faster-recovering, large economies look toward a gradual removal of monetary accommodation, we must be mindful of the possible implications for economic and financial stability.

As I mentioned earlier, the most urgent task is to get people vaccinated across the globe. This is a prerequisite for the global economy to embark on the path to sustainable recovery. Recently, IMF staff put forward a proposal—a $50 billion plan—intended to help bring an end the pandemic. This plan aims to vaccinate at least 40 percent of the population in all countries by end-2021, and 60 percent by the first half of 2022. The plan requires additional grants to the Covid-19 Vaccines Global Access Facility (COVAX), more surplus doses donated to regions with vaccine shortages, and free cross-border flows of raw materials and finished vaccines. At the same time, the plan requires us to remain vigilant against new variants, expand investment in vaccine production capacity, diversify vaccine production, and develop contingency plans to handle supply shocks. During the interim period when vaccine supply is limited, we will need widespread testing and tracing, therapeutics, and effective public health measures, as well as a ramping up of preparations for vaccine deployment.

The $50 billion price tag for this plan could generate an estimated $9 trillion in additional output by 2025. Therefore, if successfully implemented, the plan will become the best public investment ever.

Of course, the IMF will not shy away from its own responsibility. We are currently preparing a new Special Drawing Rights allocation, unprecedented in its size, to boost the international reserves and liquidity of all our member countries. At the same time, we are considering how to provide greater funding support to all member countries with vaccination needs.

Second, fighting the COVID-19 pandemic is no doubt our global task at hand. However, even as we are working on this task, we must not forget climate change, which I believe is “our most global challenge”, as I described at the recent the Green Swan conference ‘Coordinating Finance on Climate’.

The world is going to have to take strong policy steps to keep global temperature increase to within 2 degrees. We see a critical role for carbon pricing, but we must also be flexible and acknowledge that regulatory and other approaches can make an important contribution as well. We have called for an international carbon price floor—possibly differentiated according to each country’s level of development—as a good way of achieving multilateral progress.

In our view, humanity has the wisdom to identify win-win opportunities for the climate and the economy. We need to be innovative and are not condemned to repeat history when development and dirty fuel use went hand in hand. We must find the best ways by which good mitigation policy can often largely pay for itself, and by which combating climate change can actually further development, rather than hinder it.

Our success is everyone’s success. Therefore, we must also be fair. However, defining what’s fair is often very tricky, as people tend to have different answers. What I would emphasize is this: we must fulfill our commitments to providing climate financing and technology transfers to less developed countries, so that they will not fall behind in their efforts to address climate change.

To conclude, the global recovery will rely on the concerted efforts of all parties, both to ensure vaccinations across the globe and to take firm action against climate change. In this respect, we are glad to see that China has started the process of implementing measures to achieve the ambitious target of carbon neutrality by 2060, while at the same time assisting other less developed countries with vaccines and funding. Looking ahead, we must secure the current recovery and maintain economic and financial stability. Starting now, we must try our best to create a more inclusive, smarter, and greener future for our children.

Finally, I once again extend my wishes for a successful Caixin Summer Summit 2021.

Thank you.