China: Size Matters


By Steven Barnett

(Version in  中文 and  Español)

Mongolia’s economy grew nearly 12 percent last year, the United States around 2 percent. So Mongolia grew around 6 times faster than the United States, yet of course the United States contributed more to GDP growth—over 150 times more. Why, because size matters.

Let’s apply this logic to China. A bigger but somewhat slower growing China of the future will contribute about as much to global demand as the smaller but faster growing China of before. This is arithmetic: An economy that is twice as big can grow by ½ as much and contribute the same to global demand. By the way, China today is more than twice as big as it was a decade ago.

So, the good news is, even with slower growth, China will continue to be an engine of global output. Indeed, an even bigger engine than before.

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Growing Institutions? Grow the People!


By Sharmini Coorey

(Version in Español)

“When you speak about institutions, in fact, you are speaking about the people.” These words, by Kosovo’s central bank governor Gani Gergüri at a recent conference in Vienna, capture an important truth that is often overlooked when we economists discuss amongst ourselves: without sound institutions, it’s very hard to achieve sustainable economic growth.

And the quality of those institutions hinges on the quality of the people running them―their educational background and training, and the prevailing business culture and approach to policymaking.

The work of Douglass North and the school of thought known as the new institutional economics has taught us that differences in deep institutions—defined as the formal and informal rules of economic, political and social interactions—are responsible for sustained differences in economic performance. This is also the central thesis in Acemoglu and Robinson’s fascinating new book, Why Nations Fail.

Inclusive (as opposed to extractive) economic and political institutions are central in nations’ efforts to avoid stagnation and ensure sustained prosperity. This is because sustained prosperity is a dynamic process of constant innovation and a never-ending cycle of Schumpeterian creative destruction, which can only be supported by open, inclusive institutions. Their thesis is certainly consistent with the contrasting experience of different countries in Central, Eastern and Southeastern Europe under communism and during the past two decades.

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Asia and the IMF: Toward a Deeper Engagement


Update: IMF Managing Director Dominique Strauss-Kahn delivered speeches in both Singapore and Beijing. In Singapore he spoke of a leadership role for Asia, while in Beijing he addressed how China is leading the world out of recession and the need for further reform of China’s dynamic economy.

By Anoop Singh

(Version in 日本語)

Asia’s standing and influence continues to grow and the IMF is working with the region to help it meet its full economic potential as it recovers from the global crisis.  In mid-November, the  Managing Director of the IMF, Dominique Strauss-Kahn,  begins a six-day trip to Asia.  First he’s in Singapore attending the 16th Asia-Pacific Economic Cooperation (APEC) Finance Ministers’ Meeting, and then goes on to China November 16-17, one of the region’s most dynamic economies. 

In Singapore, the Managing Director co-chairs a roundtable discussion on economic policy challenges facing the region and will deliver a lecture on the role of Asia in reshaping the post-crisis global economy. In China, he will discuss with the authorities their policy response to the global crisis and ask senior government officials about their outlook for the Chinese and world economies.

The visit is another sign of the importance which the IMF attaches to its relationship with  Asia as the region leads the world away from crisis toward global recovery.  It will also provide Asia and the IMF an opportunity to deepen their engagement.

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