Speech

Distinguished guests, colleagues, friends of the IMF, welcome to the 2016 Michel Camdessus Central Banking Lecture!

To our Chinese colleagues and guests – also a very warm welcome!

欢迎 [Huānyíng].

This is the third edition of our signature lecture on the role of central banks, and named after the IMF’s longest serving and widely esteemed Managing Director, Michel Camdessus.

Michel is unfortunately not able to be with us today, as he had originally planned, but I know that he is watching the webcast at this very moment. So I am sending him a “Salut, Michel!” in the name of all of us, and wishing him all the best from DC!

I am absolutely delighted to welcome a very important economist, reformer, and central banker today in our midst.

Please join me in welcoming our speaker, Governor Zhou Xiaochuan, the 11^th and longest-serving Governor of the People’s Bank of China.

The occasion for Governor Zhou to speak to us today could not be more opportune. We are witnessing China taking on a growing leadership role in the economic and financial arena. China has been leading the G20 with vision, determination, and elegance.

And we are marking an important milestone this year – both for China and the IMF. As of October this year, the Chinese Renminbi will be included in the SDR basket.

These are massive achievements that are built on many years of hard work. We are very privileged today to hear firsthand from Governor Zhou, who has skillfully steered China’s monetary policy through this impressive transformation.

Let us think about that for a moment as we ponder Governor Zhou steering China through the rocky shoals of the global economy. I wonder: if China were a ship, how should we imagine it?

Judging by its weight in the global economy, China could certainly be a container ship of the new “mega” class – a few of which now navigate the world’s seas and the newly opened Panama Canal.

China accounts for about the same share of global output as all other emerging economies combined! It is home to almost a quarter of the world’s workers, and has 14 cities with more than 5 million people.

It represents 30 percent of global investment, and houses 5 of the world’s largest 20 banks by assets. And in case you saw the movie Batman vs. Superman, 12 percent of its global takings came from China!

Just blink, though, and instead of the mega container ship you will see an elegant speedboat.

The speed of China’s transformation in the last generation has been phenomenal. Growth averaged 10 percent since 1985, slowing to a mere 9.2 percent at the height of the global financial crisis in 2009.

Even with somewhat slower growth, last year alone China added to its GDP the equivalent of a mid-sized economy like Sweden, Poland, or Turkey.

Yet, whatever ship it may be, China is well aware that sailing does not come without risks. Winds and tides can change drastically and without notice.

Luckily, China has a long history of ship design – going back at least to the efficient and sturdy junks of the second century. [1] And so, as we speak, the country is reinforcing its hull to protect it from possible collisions, and upgrading its rudder to become more nimble.

Work is advancing on multiple fronts:

• To begin, monetary reforms have introduced more flexible interest rates and a bigger role for market forces in the exchange rate. These are major accomplishments in which Governor Zhou has played a crucial role.
• An equally important pillar of the government’s agenda are financial reforms. Again, a key priority of Governor Zhou is to make China’s financial system more open but also safer and more inclusive.
• A deposit insurance scheme is in the plans – and our ongoing Financial Stability Assessment Program should help in strengthening oversight of the country’s increasingly large and interconnected financial system.

So China is not only rebuilding its ship, its masters are also learning how to navigate a larger boat on the high seas.

China is moderately reducing its speed, sailing at a more sustainable pace. It is shifting weights on the deck, away from investment toward more consumption; with less manufacturing and more services, and greater public services.

It is also shifting to a cleaner engine: in 2017, China will roll out the world’s largest emissions trading system.

Overall, China’s smoother journey will benefit the global economy – though as with all large ships, there can be a wave that causes significant ripple effects for smaller boats.

With these effects come international responsibilities, which China is embracing in its stride.

So, today, we have the great honor to have one of the helmsmen of the Chinese economy

Governor Zhou is first and foremost a friend. I have known him for many years, and my respect and admiration for him has only grown over that time.

Global leaders and policy makers found in Governor Zhou a partner who spoke the same language. And by this I do not mean his mastery of English – but the language of an internationalist and a multilateralist.

What distinguishes Governor Zhou as a colleague is the fusion of global vision with characteristic Chinese wisdom. Underneath a calm demeanor is a world-class intellect and an energetic personality with wide-ranging interests.

Perhaps less known to the world is that Governor Zhou is an avid player of badminton and tennis. Both sports demand stamina, agility, speed, precision, and strategic skills, all of which come very handy for a central banker!

This athlete is also an electrical engineer who traveled the world and developed a deep appreciation for Western classical music and opera.

Back in 1998, when he was President of the Construction Bank of China, Governor Zhou co-authored a book entitled “ Journey of Musical Operas.”

You will notice that he is keeping with our previous speakers who share a passion not only for economics and finance – but also for music!

Sharp, talented, well-rounded and open-minded, Governor Zhou is a key player in helping China navigate the next phase of its transformation. Mr. Governor, we are keen to hear how you see the world from the ship’s deck.

Please join me in warmly welcoming Governor Zhou!