Deepening economic structural reform, enhancing infrastructure construction cooperation
and maintaining economic vitality in Asia
Address at the 46th Annual Meeting of the ADB Board of Governors
Vice Finance Minister Zhu Guangyao
The People’s Republic of China
It gives me great pleasure to attend the ADB annual meeting in New Delhi. I would like to extend my heartfelt gratitude to the Indian government and people for the warm hospitality.
I congratulate Mr. Takehiko Nakao on his election as President of ADB.
At present, the global economic situation remains complex and volatile, and the weak growth momentum continues. The world aggregate demand is insufficient, and Asia is facing double challenges of internal structural reform and weakening external demand. As a multilateral development institution in Asia, ADB should uphold its due mandate and make contributions to intensifying economic integration, expanding intra-regional demand and promoting investment in real economy in this region. To this end, I would like to make the following three points.
Firstly, adjusting strategic priorities and promoting regional interconnectivity. The characteristics of Asian people in the era of economic globalization can be generalized as 4Es, namely valuing education, real economy, employment and exchanges. The feature of Asian cultures boils down to harmony and inclusiveness. In its business operations, ADB should highlight such a feature, and reflect demand of each country in this region. ADB should expand its lending scale for the member countries’ infrastructure projects, streamline the procedure and enhance its efficiency. ADB’s support in infrastructure will lay a solid foundation for the member countries to achieve sustainable economic development and make contributions to expanding intra-regional investment demand and fueling economic growth in this region. Meanwhile, ADB should strengthen its support to regional economic integration and interconnectivity of infrastructure, so as to create a material foundation for the regional members with different development stages to draw upon each other’s strengths and share prosperity.
Secondly, strengthening financial capacity and improving governance structure. The immediate challenge to ADB at present is the weakening lending capacity, which will severely affect ADB’s capacity to provide development assistance to its developing members. We therefore urge ADB to consult with all members and put forward a package of solutions. Such a package should not only focus on addressing the short-term problem of financial constraint, but also take a long-term vision, including reforming ADB’s governance structure that currently dampens its financial capacity and its long-term development, and increasing voice and representation of developing countries. By so doing, ADB will make its governance structure more accurately reflect the changing economic weights in Asia and more effectively enhance the will and capacity of member countries to hold responsibility for ADB’s development.
Thirdly, deepening structural reform and promoting economic development in Asia. At present, Asia is in a complex economic environment, where there are both opportunities and challenges. Asia is the most dynamic region in the world. In recent years, its contribution to global economic growth has surpassed 50%. To maintain such a growth momentum requires all countries in the region to strengthen policy coordination and create synergy effect. We therefore pay high attention to the spillover effectiveness of the QE monetary policies adopted by the major economies in the world. We recognize that indeed there is a need for Japan to carry out key economic reforms to get rid of deflation quandary, which has last 15 years. However, the right policy choice should be economic restructuring. The monetary policy cannot substitute structural reform, even though this will be a painful process at costs. For many years, Japan’s interest rates had been kept almost zero. The massive QE monetary policy with 2% inflation target will not generate sustainable thrust to the economy. Moreover, its excessive liquidity cannot be absorbed by the real economy and the capital market. The inevitable consequence will be impact on exchange rates and capital flow. The policy spillover effect has already exerted impacts on its neighboring countries, particularly those having similar economic structure with Japan. As a result, these countries have to urgently launch stimulus packages in response. We must emphasize that each country’s monetary policy should remain oriented towards domestic objectives and refrain from competitive devaluation and targeting its exchange rate for competitive purposes.
Facing these new challenges, Asian countries should strengthen policy coordination, deepen economic restructuring reform and reinforce our development strength by creating new growth engines, so that we can explore new areas for cooperation in our respective reform agenda. China is now intensifying its economic restructuring process and will further promote reform and opening up. Further openness will contribute to China’s reform, restructuring and innovation, thus fulfilling its sustainable and healthy growth. China will continue to work with ADB and other members to make unremitting efforts for common prosperity in Asia!