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Zhu Min: Asia in a Changing World

IMF official: Expect moderate growth ahead
Deputy Managing Director of the International Monetary Fund Zhu Min in Hong Kong on March 19, 2012. (Asia Society Hong Kong)
by Natalie Lai
19 March 2012

HONG KONG, March 19, 2012 — The turn of the 21st century has been dominated by an increasing awareness of the growing strength and economic power of the Asia-Pacific region. The Asia Society Hong Kong Center invited Deputy Managing Director of the International Monetary Fund Zhu Min to share his views on the changing global macro-economic environment, the shifting global economic structure and challenges facing the "new Asia."

Zhu assumed his current position in July 2011, having been appointed Special Advisor to the IMF's Managing Director in May 2010. Prior to that, Zhu was Deputy Governor of the People's Bank of China and also worked at the World Bank, in addition to having taught economics at Johns Hopkins University and Fudan University. Zhu is also known for a seminal speech he made in January 2007 (when he was still a relatively obscure official at People's Bank) in which warned about the dangers of subprime mortgages.

Globally, Zhu said, growth is slowing down. According to the IMF's forecast, the global economic growth will be 3.5 percent this year, compared to 4 percent last year. "If you're looking at the West, it looks better in the past two months. In the emerging markets, growth is still strong, but less than expected. Risks are still on the downside." Zhu posed the question that would shape his discussion: "Are we on the way to strong recovery, or is there still a bumpy road ahead?"

In the United States, Zhu said, "A few things are very concerning," particularly the 3% output gap between growth and potential growth. "The labor productivity is still lower than any labor productivity level before the crisis," he said. "And we're not seeing many mergers or acquisitions."

In Europe, Zhu said, the major issue remains liquidity. "We are still expecting to see a moderate recession in Europe at this moment," he said, adding that further financial integration and a clear growth strategy are crucial to risk-management in the region.

Zhu finished his discussion with an emphasis on controlling risk in the global economy. To accomplish this, he argued, governments and international institutions must take responsibility for carefully managing the deleveraging process and access to liquidity. He said, "It's extremely difficult to have strong growth within a deleveraging process. In that sense, we are probably looking at moderate growth for some time to come. And with the accessed liquidity, the volatility is still the main risk."

In summation, Zhu noted that the IMF is doing a study called "Interconnectedness." The global economic map has changed drastically, he said, "and all events are so closely related. It's a big pot, we all have to share the same cycles."

Reported by Maddie Gressel

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