All into Account - Toward a New Economic Growth Model for China: IMF Perspectives on Advancing China’s Reforms

[on-hold music] Hello, this is Joyce Chang, Chair of Global Research at J.P. Morgan, and you're listening to All Into Account, our global cross-asset strategy podcast where we break down the key trends impacting financial markets. Well, I am just so pleased to be joined today with Krishna Srinivasan, Director of the Asia and Pacific Department at the IMF. Now, Krishna has been a longtime research contact, a real go-to person for decades, as well as a featured guest at many J.P. Morgan conferences around the world. Over the course of his decades at the IMF, he's worked on some of the largest emerging markets countries during critical times. He served as the deputy director in the Western Hemisphere Department. He focused on Brazil and Mexico there. He moved to the Asia department where he worked on China and Korea before assuming his current position as director. Now, the IMF has just come out with a new book on China, and it is an absolute must-read for China followers. It integrates lessons from the IMF's close engagement with Chinese authorities through their annual consultations. The book, Towards a New Economic Growth Model for China, really delves into the factors that drove China's extraordinary economic transformation and also the challenges ahead. The release of this book is particularly timely in the run-up to the annual IMF World Bank fall meetings that will be hosted in Bangkok. Now, China's record one point two trillion trade surplus has fueled concerns about global imbalances, excess manufacturing capacity, and currency, um, under evaluation. So it's a must-read. It lays out macro and financial frameworks for a new growth model, and it discusses so many issues that are top of mind, including industrial policy and credit allocation, local government debt, and also the green transition. So Krishna, welcome to the podcast, and I wanna jump right into the discussion. So Krishna, you've argued that China's growth is at a crossroads after a period of investment growth. And your team has noted that many of the factors that drove China's growth are now reaching their limit. Can you just walk us through what the key drags are on growth today?

Thank you, Joyce. Uh, always a pleasure to, to be with you. So, so Joyce, when you talk about China's growth model, and this is a model which has delivered spectacular results for China over the last several decades. If you look at growth since, you know, the nineteen eighties to until now, it's averaged about nine percent, which is five point five percentage points higher than for an average EM. Uh, since, China's become the second-largest economy, hundreds of millions of people have been removed of poverty, and China is now the tech frontier. So it goes without saying that the model which China has been using has been, uh, pretty, uh, successful in delivering results. And, you know, this was not accidental in the sense that, you know, they have pursued bold reforms of policies, institutions, ins-incentives and so on. And what I would say is if you can think of the period right after the GFC, what we have seen is that the reform momentum has slowed. At the same time, they have the same growth