I would like to thank the hosts of this auspicious conference, the Government of the People’s Republic of China and the World Bank for inviting me to be part of this distinguished opening panel.
We are gathered here to celebrate one of the most significant relationships in global development the relationship between China and the World Bank. Over the past 30 years, this has been a remarkably successful relationship, characterised by a period of rapid growth and development in China and the gradual maturing of the World Bank itself.
This relationship is one that speaks to deep cooperation, openness, a commitment to learn and most importantly a willingness to respect each other as mutual partners. It is a relationship where, on the one hand there is a strong government which displays a demonstrable commitment to both development and its people which has succeeded in structuring a partnership with the World Bank to support that development.
Similarly, the World Bank has learnt much about development in looking at how China has approached its development objectives. We celebrate here a relationship that has confounded those who have argued that such a relationship would produce a clash of orthodoxies.
Surely, the relationship over the thirty years must have presented enormous challenges from time to time. Analysts like Dani Rodrik have consistently argued that if China had simply followed the standard prescripts for growth articulated in the Washington Consensus, it would not have achieved the spectacular growth, development and poverty reduction that we have seen. So while China has clearly benefited from this partnership, our collective theories of development have been radically changed too.
The Commission for Growth and Development, which was headed by Professor Michael Spence, analysed the growth episodes that have occurred since World War 2 and abstracted the features that have been common to all of those episodes. The five features that stand out are:
- Openness – a commitment to import knowledge and exploit global demand.
- Macroeconomic Stability – the maintenance of modest inflation and a focus on the sustainability of public finances.
- A Future Orientation – an element which is measured by high investment levels and high savings ratios.
- Allowing markets to allocate – this is seen in both prices and resources.
- Leadership and governance – a commitment to the development of sound institutions, the building of a capable administration and a continuity of policy.
All of these features are in evidence here in China in very large measure and this is the reason why the relationship works.
The present period is still characterised by the shadow of the global financial crisis. This crisis has forced a re-evaluation of our broad development approach, of the role of the state, the role of finance and the place for global economic cooperation. Most importantly, the crisis has demonstrated the inter-connectedness of the world in which we live in. It has showed the inter-connectedness of development.
For me, the biggest lesson of the financial crisis is that we need much better, stronger and more robust institutions of global economic governance than before. Globalisation has brought huge benefits to millions of poor people, most notably in China and in India. The rise of global trade has enabled many developing countries to emerge from poverty. However, globalisation has also introduced a level of complexity and risk to the global economy that can only be managed by more integrated and powerful global institutions. Globalisation and the benefits that it has brought must continue, but it requires a very different system of global governance to manage these new risks.
Without a coordinated global economic response to the crisis, we would not have seen a return to growth, albeit moderate growth, so quickly. Without a global approach to the regulation of the banks, for example, we cannot prevent another financial crisis. Yet in making banking regulatory reforms, we must prevent any return to the ‘one size fits all’ approach. Going forward, we need continued cooperation and joint action to manage the orderly unwinding of global economic imbalances.
There is still resistance in some quarters to greater multi-lateralism. While the G20 has provided a stronger platform for global economic governance, we are still a long way off from reforming the global financial system to one that is more robust, one that supports development and one that is ultimately more equitable. Reform of the governance structures of the Bretton Woods institutions has proceeded at a snail’s pace. Surely we must use the crisis as an opportunity to make faster, more enduring changes to these institutions.
A major concern of developing countries, including my own is that while globalisation and trade will continue to serve as major drivers of growth, the cost of the crisis on developed countries will make it harder for development to occur in developing countries. Justin Lin, in a recent paper on Growth Identification and Facilitation points out that:
For developing countries, in the midst of a financial and economic turmoil that was not of their own making, the road ahead is likely to be rocky. Because of the sluggish recovery in high-income countries and the heavy cost of the crisis there ... (lower growth, high unemployment, and rising public debt), [developing countries] will have to confront a more difficult global environment for their exports and financing conditions.
All emerging markets are faced with this complex dilemma where we are still poor countries and so we still require global trade and export growth but we also have to re-balance our economies towards domestic consumption. This complex and delicate dance is China’s most pressing economic policy challenge in the decade ahead. We look forward to continue learning from China in this regard.
In South Africa, we have seen much faster growth in trade with countries such as India and China than with our traditional trading partners. We are looking at these fast-growing emerging markets to help pull the world economy along and support continued development and growth in Africa. All of Africa is also learning some lessons, both from the development of China and in how we interact with the World Bank, and how, structured properly, a partnership with the Bank can be mutually beneficial in support of our development. China’s growth and development and the World Bank’s maturing relationship with Africa have hugely positive implications for the continent from which I hail.
In conclusion I would like to thank both the Government of the People’s Republic of China and the World Bank for the lessons of partnership that continually lives out the need to seek the truth from facts. The truth is that this partnership is strong and this is borne out by the facts of the mutuality of lessons learnt - not only for China and the Bank, but for all of the world. As an African, I want to say thank you for leadership and consistency.
Thank you.
