IMF Managing Director Ends China Visit, Meets Top Chinese Leadership

Ms. Christine Lagarde, Managing Director of the International Monetary Fund (IMF), made the following statement today in Beijing. 

“I would like to express my deep appreciation to the Chinese authorities for welcoming me during my first visit to China as Managing Director of the IMF.

“I have had the privilege to meet with Premier Wen Jiabao, Vice President Xi Jinping, and Vice Premier Wang Qishan. I have also had a productive exchange of views with the People’s Bank of China Governor Zhou Xiaochuan.

“We discussed key challenges facing the global economy, the Euro Zone in particular, and their implications for China and the Asia region. We agreed on the importance of strengthened international policy cooperation and decisive collective action to ensure strong, sustainable and balanced global growth.

“We noted the growing interconnectedness of countries in today's global economy. As the world’s second largest economy, China plays a crucial role in helping to promote global economic recovery through trade, investment, and financing.

“China is on the right path in reducing domestic vulnerabilities by moderating the pace of credit growth, increasing provisioning and capital, and expanding the scope of macroprudential policies. Fiscal policy is also appropriately moving back gradually to balance.

“China is also on the right path in terms of reorienting the economy towards domestic consumption and in seeking more inclusive growth for its people, as laid out in the 12th five-year plan. In this regard, reform of the financial system continues to be important. This integrated package of policies, including continued strengthening of the renminbi, would have a positive effect for China and the global economy.

“We discussed China's leading role as part of the G20. China also plays a major role at the IMF and is in our top three shareholders. China is a very important member and valued partner of the Fund and I greatly appreciate the strong, close and cordial relationship we enjoy with the Chinese authorities. We had the opportunity to discuss how we might strengthen this even further in the future.

“Finally, during my visit, I was invited to address the Annual Conference of the International Finance Forum in Beijing where I met with Chinese provincial leaders, private sector executives, academics and think tank representatives.

“Again, it was my great pleasure to return to China and I would like to thank the Chinese people for their gracious hospitality.”

Press Release No. 11/406
November 10, 2011

World Bank. China: Second Beijing Environment Project

Ratings for the Second Beijing Environment Project for China were as follows: outcomes were satisfactory, risk to development outcome was low, Bank performance was satisfactory, and borrower performance was also satisfactory. Some lessons learned included: the Bank should adopt a flexible approach to the institutional model for the sector, and in particular consider the country conditions, instead of advocating the traditional utility model as the default option.

The arrangements in place in Beijing assure sustainable service provision, which rely on a combination of politically feasible tariffs and regular confirmed resource transfers from the municipal government. However, such an arrangement is only feasible where the city can: (i) ensure service provision at low cost; (ii) take on responsibility for servicing debt; and (iii) provide timely cash transfers to meet shortfalls, especially in relation to new investments. Water re-use in water scarce areas is sound policy. Beijing has performed well to achieve a 50 percent rate of water reuse, by addressing the key issues relating to water re-use: (i) reclaimed water quality and reliability; (ii) price of reclaimed water; and (iii) cost and benefit of using water supplied through the system and reclaimed water. This should serve as an example for other Chinese cities.

The boiler conversion program faced not only major technical, environmental and economic issues, but also significant coordination and political issues. The ambitious targets set for conversion to natural gas-fired boilers were only achieved (albeit mostly outside the project) because of strong leadership, both at central and municipal government levels. In areas involving significant commercial operations (such as boiler conversions), newly established municipal entities with no commercial expertise are not likely to succeed. It might have been more appropriate for the government to have partnered with a truly commercial company, or the boiler conversions might have been left entirely to market forces with some incentives to end-users.

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