:00:15. > :00:20.broadcaster. Now it's time for HARDtalk.
:00:20. > :00:25.The row between the European Union and China over solar panel has put
:00:25. > :00:30.the focus on a China's over- production in many areas of
:00:30. > :00:36.industry. It is something solar panels at Alloa or price then the
:00:36. > :00:41.cost of production. Is the Chinese business model in danger of
:00:41. > :00:48.collapse? My guess is Zhu Min, a former deputy of the People's Bank
:00:48. > :00:54.of China and now a top official on the IMF. With Japan are trying to
:00:54. > :00:58.awaken from 8 years of economic slumber, can Asia put itself on a
:00:58. > :01:08.sustainable pattern of growth that is good for its people and the rest
:01:08. > :01:32.
:01:32. > :01:41.Zhu Min, will come to HARDtalk. Thank you. How much trouble is
:01:41. > :01:47.China's business and export model in? It is investment driven. Before
:01:47. > :01:54.it was export driven. Obviously, the need moved to a more investment
:01:54. > :01:59.driven model. Investment issue the Chinese economy is facing - the
:01:59. > :02:06.good news is that the government is understanding. Authorities agree
:02:06. > :02:11.that we have to move that way. I think there will be a reform agenda.
:02:11. > :02:16.That issue of increasing consumption at home but first of
:02:16. > :02:22.all, in global terms, wherever you go, you hear the same thing - China
:02:22. > :02:29.is flooding our markets with ultra- chic products and factories are
:02:29. > :02:36.closing. Is that a fair.? This is part of globalisation. Being able
:02:36. > :02:41.to bring more and more Labour into the market and at low cost but
:02:41. > :02:47.relatively high a product to every consumer. Which is very good news.
:02:47. > :02:52.But it is more than that. There EU is threatening to raise import
:02:52. > :02:58.tariffs on solar panels because China is producing no - he's
:02:58. > :03:07.selling them at a price which is lower than producing them. China is
:03:07. > :03:12.producing too many goods. It is not producing too many goods. With
:03:12. > :03:19.globalisation, countries should be able to produce as much as they can.
:03:19. > :03:28.There is unfair competition. That is the issue. Is there unfair
:03:28. > :03:35.competition - but the point is, is their fair competition? Both have
:03:35. > :03:42.the right to argue and defend. solar panel is one example of
:03:42. > :03:50.overcapacity in China. What the former Secretary said it is that
:03:50. > :03:54.it's not just clean technology - still, shipbuilding, China's
:03:54. > :04:04.industrial policy relies of an array of subsidy. It is state
:04:04. > :04:05.
:04:05. > :04:08.capitalism. I will not take that. If you save China has capacity
:04:08. > :04:16.issue but it is not necessarily from the subsidy of the government
:04:16. > :04:24.issue. The skill of economy is huge in China. When the world open the
:04:24. > :04:28.market to Chinese company, to expand, for example - Taiwanese
:04:28. > :04:36.company which employs one million employees to produce iPads. It is a
:04:36. > :04:41.huge scale. Right? Is it will bad? I think it is good. Many countries
:04:42. > :04:45.have benefited from China's rapid economic growth especially during
:04:46. > :04:50.the economic downturn and many people happily use Chinese products.
:04:50. > :04:57.But it is how you have done it and that it is not necessarily
:04:57. > :05:02.sustainable because it relies on state subsidies. US space economist
:05:02. > :05:07.the a study looking at all to parts in China and they said that it is
:05:07. > :05:10.not the low labour costs and under evaluation that account for the
:05:10. > :05:15.successes but subsidies which account for 30% of industrial up
:05:15. > :05:21.wards. Most of the companies would probably be bankrupt without these
:05:21. > :05:29.subsidies. These are two different issues. The first issue is the
:05:29. > :05:33.scale. As I said, China does have a scale issue over capacity. It is a
:05:33. > :05:43.serious problem for sustainability for the Chinese economy. What you
:05:43. > :05:45.
:05:45. > :05:53.mean? Is it a skill shortage? capacity. They expect strong growth
:05:53. > :05:59.but at the turn of demand is a wakening. We have a relative
:05:59. > :06:04.economic growth. Originally, you were making too many things which
:06:04. > :06:09.people, because of the slowdown globally, would not buy. But what
:06:09. > :06:12.about the issue of state subsidy? Three years ago he would deputy-
:06:12. > :06:18.governor of China's central bank and this kind of support was given
:06:18. > :06:28.by the state. There is a lot of talking about the subsidy issue on
:06:28. > :06:29.
:06:29. > :06:33.China. What about Europe? What about other parts of the world?
:06:33. > :06:39.World Trade Organisation? They are supposed to play the role to handle
:06:39. > :06:45.this issue. It is very easy for both sides to defend, argue and to
:06:45. > :06:53.bring information on the table. That is the way to solve it. With
:06:53. > :06:57.growth in China slipping to 7.5%, China's new leaders, Xi Jinping and
:06:57. > :07:02.others, have said they want to tackle this issue of overcapacity
:07:02. > :07:08.because some of these companies which have benefited from the huge
:07:08. > :07:13.stimulus packages, now have to lose employees, closed down factories
:07:13. > :07:18.and that is a big problem, or is it not? China's economic growth is
:07:18. > :07:25.slowing down compared to a few years ago - it was more than 10%.
:07:25. > :07:29.Now it is more than 7.8% which is slowing down by Chinese standards
:07:29. > :07:36.but I well standards it is still very high. China has a lot of space
:07:36. > :07:46.- physical its sector. There is room to move. But the key issue is
:07:46. > :07:46.
:07:46. > :07:52.not growth but the quality of the growth. Changing the growth model.
:07:53. > :07:59.Which means you need to give the people more so people can consume
:07:59. > :08:04.more. And also export as well. the people and not if you're in
:08:04. > :08:08.danger now, as you say, the business model has been dependent
:08:08. > :08:14.on a state subsidy. You're going to close factories down if they're not
:08:14. > :08:20.going to be brought domestically or externally. For example, open a
:08:20. > :08:24.service sector. If you opened the service sector, and let people
:08:24. > :08:29.moving, there is a lot of room for people to make money. You want to
:08:29. > :08:34.be able to consume. You want people making more money so they can spend.
:08:34. > :08:42.This is important. You have to create more opportunities for them.
:08:42. > :08:46.The service sector is a big area. Also address the reason why China
:08:46. > :08:51.consumer likes to save - largely because a large part of it is they
:08:51. > :08:57.do not feel secure about their future. When I reached 75, who is
:08:57. > :09:03.going to look after me? I a better start saving. You have to increase
:09:03. > :09:06.public spending on health, education, and so people know that
:09:06. > :09:14.they're going to look after them when they get older. I agree with
:09:14. > :09:23.you. Why have they not done that? They are doing that. China is
:09:23. > :09:28.building it gradually. They are providing healthcare. Building the
:09:28. > :09:36.system does take time. You are absolutely right. There are two
:09:36. > :09:39.things come and China have 49 GDP saving rate. They have a saving
:09:39. > :09:45.culture. But the most important thing is that people feel uncertain
:09:45. > :09:50.for their futures so they save more. This has been done and recognised
:09:50. > :09:55.as a problem. However, you need to do this fairly quickly because it
:09:55. > :10:00.may be good by international levels up growth is slowing which is going
:10:00. > :10:09.to cause problems. You're going to have to address this problem but
:10:09. > :10:16.how quickly can you do it? government is very committed. We
:10:16. > :10:21.have conversations with civilians, authorities. The government agrees
:10:21. > :10:31.and changing the growth model is a priority. When you were as senior
:10:31. > :10:33.
:10:33. > :10:37.Chinese official, looking EU now with your IMF hat on., the IMF is
:10:37. > :10:43.setting a lot of stores on Asia leading the global recovery. It
:10:43. > :10:48.says that there Asia, 5.7% gross. With what we have been discussing
:10:48. > :10:58.about the issues in China and the huge challenge us, is that optimism
:10:58. > :11:01.
:11:01. > :11:10.misplace? Asia is slowing down. China, India and a few other
:11:10. > :11:20.economies are slowing down. The second issue is the market has been
:11:20. > :11:24.
:11:24. > :11:34.privatise because of concerns about the US. It is volatile. The row
:11:34. > :11:35.
:11:35. > :11:44.concerns about economic growth for Asia. But in Asia, the physical
:11:44. > :11:53.space is still there. Number two, the debt level is relatively low.
:11:53. > :11:59.The country, government, household level. It is even a level -- lower.
:11:59. > :12:05.In Asia, and growth is slowing down because of mostly of external
:12:05. > :12:10.issues. Still allowed the room, Asia would be able to move into
:12:10. > :12:20.growth. What about Japan and barking on an ambitious programme
:12:20. > :12:22.
:12:22. > :12:32.of economic reform under Prime Minister Shenzou- RBA, Abenomics. -
:12:32. > :12:41.- Shinzo Abe. Pumping money into the financial system. Is Japan on
:12:41. > :12:48.the right track? It has had more than 20 years of economic slump.
:12:48. > :12:58.Japan took decisive actions and move the economy out of the 20 EO
:12:58. > :13:08.recession. This is good for the world. -- 20 my tea. They have 2.2
:13:08. > :13:09.
:13:09. > :13:17.% of GDP for fiscal stimulus. government spending. 7% in GDP
:13:17. > :13:25.growth for the sheer. This is good. -- for this year. But nothing is
:13:25. > :13:33.for free. You are borrowing money. Japan has high debts all ready.
:13:33. > :13:37.Over 250 %. The key issue, currently, is taking decisive
:13:37. > :13:42.policies is important but they also have to take seriously the
:13:42. > :13:47.consolidation plan to make sure you are able to stabilise the debt size.
:13:47. > :13:50.The row concerns globally about big economies that this will amount to
:13:50. > :13:56.a weaker yen which will make Japan's exports have much cheaper
:13:56. > :14:02.and more attractive. That will bring up a whole new set of issues
:14:02. > :14:11.and intentions. There is an possibility? The global community
:14:11. > :14:21.have been very understanding. It is good news for Japan to move forward.
:14:21. > :14:23.
:14:23. > :14:33.And let in the yen and go down? We have heard rumblings of these.
:14:33. > :14:45.
:14:45. > :14:53.It will help the global financial stability. The IMF is keeping a
:14:53. > :14:59.person, person, how do you feel working at
:14:59. > :15:05.the IMF? You are familiar with the criticisms, run by the West. The
:15:05. > :15:15.West make up more than 50% of the vote rise in the IMF. How does it
:15:15. > :15:21.make you feel as a Chinese person? Who quarter has to reflect real
:15:21. > :15:29.global structure also changed. The government reforms have to bring
:15:29. > :15:35.more emerging-markets and has made increased shares. But even as
:15:35. > :15:41.things stand, Belgium has more than twice than Brazil with 200 million.
:15:41. > :15:49.Belgium, slightly less than India with a billion. Look at his figures.
:15:49. > :15:55.It is not quite right. After 2010, we had a few issues. One issue was
:15:56. > :16:01.GDP. The court will formula has many variables. Briefly, you make
:16:01. > :16:06.it simple. My main point is that the West represents cost % of the
:16:06. > :16:12.global population but their combined global vote in the IMF is
:16:12. > :16:19.more than 50%. They control it. It is reached. Is that a valid
:16:19. > :16:27.criticism? Yes. That is why we had the credit 10 governance reform.
:16:27. > :16:32.But after that, the emerging economies, the top ten emerging
:16:32. > :16:40.shareholders, in Japan, India and China, they were the top ten
:16:40. > :16:45.shareholders. At the moment, China has 20% combined voting power were
:16:45. > :16:51.on the 24 member board. The IMF contributions Asia makes he's a
:16:51. > :16:58.small percentage. The US and UK make up more than 50%. His China
:16:58. > :17:05.prepared to pay more as a result of having a greater say? That is the
:17:05. > :17:15.rule. I think 2010 gave China and the voting vote of 60%. China has
:17:15. > :17:17.
:17:18. > :17:23.to pay for the 60% of voting power and voice. That will be 2014?It
:17:23. > :17:27.was the 2010 reform. When will it be implemented? The deadline is
:17:27. > :17:37.24th October of. You past the deadline but it has not changed.
:17:37. > :17:40.
:17:40. > :17:47.Why? It was the T20 initiative.In 2009. In 2010, in fact. -- G20.
:17:47. > :17:55.Today, in all the G20s, one country has not validated the reform yet.
:17:55. > :17:59.We need it. This is a major issue. We are still waiting. Even as
:17:59. > :18:04.recently as October 2012, the Governor of the Baker of Korea said
:18:04. > :18:09.the IMF does not reflect Asian interest effectively it its
:18:09. > :18:16.decision-making process. You accept that is one of the key reasons why
:18:16. > :18:22.IMF lacks legitimacy in Asia. have to keep reforms, the
:18:22. > :18:32.governments reform, breezy shareholding structures, popular
:18:32. > :18:33.
:18:33. > :18:37.structure. Then we have legitimacy. When an investigator from Singapore
:18:37. > :18:43.says that there is an indisputable correlation between IMF assistance
:18:43. > :18:47.and Western interest which reflects the fact they control the IMF as
:18:47. > :18:52.things stand, does that mean when we see Asia as having a bigger say
:18:52. > :18:58.in the IMF, the IMF will reflect the geopolitical interests of Asia
:18:58. > :19:04.more? That is not the case.That is not going to happen? The voting
:19:04. > :19:10.power is one thing. The main principle is dealing with countries
:19:10. > :19:16.in different cases, maintaining fairness and transparency. We treat
:19:16. > :19:24.every member with the same standards. Is that the case?The
:19:24. > :19:29.voting power is true. It is different for markets. But overall,
:19:29. > :19:39.that is the most important principle. When you look at Greece,
:19:39. > :19:40.
:19:40. > :19:49.and IMF had an internal report in the fines and loans the IMF makes,
:19:49. > :19:54.64% go to Europe. Next year, 80% of funds are for Europe. It makes you
:19:54. > :20:02.wonder whether be. The professor makes is that the IMF reflects
:20:02. > :20:10.Western interest is a valid one. -- point. Not really. Fines go to
:20:10. > :20:19.countries with a crisis. That's all in Europe. -- funds. If you are
:20:19. > :20:25.looking at five-97, the crisis in Asia from lending went to Asia. --
:20:25. > :20:31.1995. It depends on where the crisis is. The crisis is in Europe.
:20:31. > :20:35.Principally, you are looking at Greece. It has had many billions of
:20:35. > :20:42.euros going to the assistant bailout. But the IMF admitted when
:20:42. > :20:47.it came to Greece, it got it wrong. We got it wrong because of a few
:20:47. > :20:55.things. We did not have the proper information at the time. We became
:20:55. > :21:02.more you optimistic in terms of sustainability and grief. It is
:21:02. > :21:06.good for the fund to do reviews afterwards so we can learn from
:21:06. > :21:11.experience and integrate lessons, learned from those experiences in
:21:11. > :21:16.the future. We thought you would have emerged from the experiences
:21:16. > :21:21.by now with the Asian crisis in the mid-nineties and criticism of the
:21:21. > :21:27.IMF policies like the Indonesians not properly assessing the impact
:21:27. > :21:33.on people socially with austerity measures. But sailing with Greece,
:21:33. > :21:40.the IMF said it was optimistic in its assumptions on growth in Greece.
:21:40. > :21:46.Why was that a mistake made? Who was responsible? A few things. The
:21:47. > :21:52.most important issue is, we do not have the proper information at the
:21:52. > :21:59.time. It did not reflect the fiscal conditions in the system. You got
:21:59. > :22:07.wrong information from grace? And the European Union? We made it
:22:07. > :22:13.a clear case that we were too optimistic. But if we go back to
:22:13. > :22:19.the same days, we would have made the same decision with the
:22:19. > :22:26.information today. We do not break any rules. I'll give you one
:22:26. > :22:31.example. You thought unemployment would be 15%. It is now 27%. He
:22:31. > :22:39.made wrong assumptions. There has been a bit of concern that there
:22:39. > :22:45.has been a blame game. One person said it is not fair or just for the
:22:45. > :22:50.IMF to wash his hands and through be. Water on the Europeans. That
:22:50. > :22:56.was said at a conference in Helsinki. We are not washing our
:22:56. > :23:05.hands. We are learning from experience. Not only for us but for
:23:05. > :23:08.everyone. We have good working relations. With the European
:23:08. > :23:18.Commission and the central bank and Krikor? Will you carry on working
:23:18. > :23:27.with them? Yes. -- troika. It depends on the situation. In Europe,
:23:27. > :23:35.it is better to have three parties working together. In those days,
:23:35. > :23:45.people recognised free parties working together to find a solution.
:23:45. > :23:51.And the IMF did not give you the correct facts? That was the
:23:51. > :23:58.information they had at the time. We had a proposal for the fiscal
:23:58. > :24:07.plans. You are deputy at the IMF. Will somebody from China White you
:24:07. > :24:12.become head of the IMF soon? depends on international community.