China's further opening-up to international trade and investment will help enhance its economic growth and stability as the country is transitioning to a stage of high-quality development, International Monetary Fund (IMF) chief economist Maurice Obstfeld has said.
China's reform and opening-up that began in the late 1970s "has had remarkable positive effects on China's standard of living," Obstfeld said in a recent interview with a small group of reporters ahead of his retirement from the IMF at the end of the year.
"Many of those effects have spilled over to other countries, particularly in East Asia and elsewhere in the emerging world," said Obstfeld, who will return to the University of California, Berkeley, after serving as economic counselor and director of the Research Department at the IMF for over three years.
As part of its efforts to commemorate the 40th anniversary of reform and opening-up, China has announced a series of concrete measures to open up wider to foreign investors, including broadening market access, improving investment environment, and increasing imports.
"Opening up more to foreign investment could benefit China greatly," Obstfeld said, adding there's "significant room" for China to open up further and to give markets even a "bigger role" in the economy, which would help enhance China's economic growth and stability.
Acknowledging that Chinese authorities have taken steps to rein in rapid credit growth and better oversee the financial sector, Obstfeld believed greater exchange rate flexibility is also essential for China's long-term growth.
"There is a big reform agenda there. I think one of the biggest issues for China is also moving to a more flexible currency," said the IMF chief economist.
"This is something that, again, is a stated goal with the authorities, but it would be very important in helping the economy adjust and also ultimately diffusing some of the trade tensions," he said.
Noting that China is increasingly a producer of new technologies, Obstfeld said it's in China's interests to strengthen intellectual property rights (IPR) protection and reform that regime on a multilateral basis.
"I think it's really important that this does not play out in a conflictual way because that will be destabilizing for the entire global economy," he said.
Reflecting on major changes in the global economy, Obstfeld said the institutions of multilateralism and the multilateral basis of international governance were "basically unquestioned" when he joined the IMF in September 2015.
However, nowadays there "seems to be more of a questioning of multilateralism, especially on the part of the U.S. government," he said.
"There is a more conflictual approach to international economic relations than we had seen, and that's a really big change," he added.
Citing the inclusion of Chinese currency, the renminbi (RMB), into the IMF's Special Drawing Right (SDR) basket, Obstfeld said embedding China into the multilateral system is "actually in everyone's interest."
While there's a rise of trade frictions around the world, Obstfeld believed that the narrative of de-globalization is "a little bit overdone."
"There are certain technological trends that are pushing some reshoring of formerly offshore industries, but I wouldn't think of those as de-globalization," Obstfeld said, adding international trade remains a "dominant" factor for most economies.
"We are not really in my view going to go back to conditions of the Great Depression where trade absolutely collapsed under the pressure of trade restrictions," he said.
