International Monetary Fund managing director Christine Lagarde gave an interview to The Straits Times US Bureau Chief Jeremy Au Yong on April 2, 2014. Here's the edited transcript of the interview.
Q: There has been a lot of concern of late that a slowing Chinese economy could be threat to the global economy. What is your outlook for China and Asia?
A: While some people will argue this is slower, we believe that sustainable, quality, slightly slower growth is fine. We are not concerned about a slight slowing of growth. We expect 7.5 per cent growth this year, which has come down from around 9 per cent, and before that, double digit growth.
But as the Chinese economy has developed so much and increased its size in the global economy, and is also gradually roaring on three cylinders rather than one or two - by that I mean not only exports, but exports, investment and consumption - it's only natural that the economy would slow down a little bit.
Overall, the situation is stable, and we also believe the Chinese authorities have a good understanding of what the challenges are and what reforms need to be taken. I was in China two weeks ago and that was the impression I got, very strongly.
If it was a hard landing, it would be a problem. But we don't see a hard landing. We see that slightly reduced growth, sustainable and better quality.
Q: What do you make of the tensions between China, Japan and Korea, and also between China and countries in South-east Asia? Will geopolitical tensions have a big impact of economic growth this year?
A: I hope this does not turn out to be the case. Geopolitical instability, potential threats do not help economic stability. China has such a large economy, so many opportunities and so much to do, and I hope it focuses on that.
When an economic power reaches the size of China and is the second largest economy in the world, it comes with responsibilities, and I think the Chinese authorities are very much aware of the responsibilities they have for their population, for their country, but also the stability of the world.
Q: You highlighted ageing societies as one of the key threats to the global economy. What sort of solutions do you propose beyond trying to get more women into the workforce?
A: For ageing societies, there are not many remedies if you want to address the workforce issue. Either you facilitate access to those who have been deprived access, and that includes generally women or senior workers, or the other one is immigration. And give access to the job market to foreigners, but that's not an easy thing to do anywhere; particularly in some countries that are very immigration averse.
Q: Most people are pessimistic that the US Congress will ratify the 14th general quota increase anytime soon. How does this affect the IMF's ability to operate?
A:It doesn't stop us from operating. We went to Ukraine on short notice, difficult conditions, but we can deliver because that is what our professionals are about. I don't think it is a factor of strength or stability to have your lead member doubting the institution that it has contributed to create.
And I don't think it is a good representation of the world as it is. We have to deal with problems of the 21st century, and we have inherited a structure from the 20th century. We need to update it constantly to make sure we are in sync with the evolution of the world.
Q: You mentioned that the US economy is the strongest among the advanced economies, but there remain doubts about the strength of that revival. DO you think the US recovery is real?
A: The revival in the job market is often questioned but because the employment numbers are not as positive as the improvement in unemployment rates. But the numbers are there - the creation of value is there, and there is a private sector that has started to invest again. We do not have too much doubt about the recovery in the US.
Q: How much of an impact do you see for the US gas revolution that is taking place?
A: My excellent macroeconomists will say the share of energy in the global economy is quite small, which limits the impact of lower energy prices. But it is the confidence factor that is really important. When a country knows that it is no longer dependent on imports from third parties, I'm sure it builds confidence and contributes in some intangible way to a recovery.
Q: Could you talk a bit about the role (Singapore Deputy Prime Minister) Mr Tharman Shanmugaratnam plays in the IMF?
A: He is a friend. He is a partner, and we have been able to work together in a very efficient, very productive, very friendly manner. For the last 21/2 years, he has been a terrific chairman for the IMFC. Because he is obviously very well read, very thoughtful and a great technician, which some people around here love, and that's good. But he's also a great listener. He's very attentive to people, to their respective concerns, to their respective agendas.
He is capable of brokering arrangements, compromises, because he understands people, and he can listen to their position without involving a big ego as part of it.
Q: Finally, your name has been proposed as a possible candidate for president of the European Union. Are you interested in running?
A: I have a job here, and I am planning on finishing my term.