Distinguished Speaker Seminars

Justin Yifu Lin, Chief Economist and Senior Vice President of the World Bank, discussed “The Impact of the Current Financial Crisis on Developing Countries” at a distinguished speaker seminar on 20 October. He discussed the dynamics of global growth in 2002–2007, raised questions on the collapse of dynamism in developed countries and its effects on developing countries, and presented possible policy responses from both types of economies, as well as international financial institutions.

The factors which spurred growth in developing countries prior to the crisis have turned, including a reduction in exports, a decrease in inward foreign direct investment and portfolio investment, higher interest rates on capital, a fall in commodity prices, capital scarcity, and a drop in remittances as developed country labor markets slacken. As a matter of priority, it is crucial to prevent contagion to developing countries' financial sectors so that their costs are minimized. Governments can use monetary easing to promote upgrading in comparative advantage industries. Furthermore, governments should strengthen social safety nets and increase investments in infrastructure and structural development because well-planned infrastructure and social projects can provide payoffs that recover the costs of investments.

Lin concluded that governments should consider whether to also utilize monetary policy to control asset price inflation. He added that financial supervision should be based on the recognition that innovations can also do damage. Responses to global crises must be systematic, comprehensive, decisive, and coordinated.

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Yunling Zhang, Professor of International Economics, Chinese Academy of Social Science, presented his ideas on the PRC's Regional Strategy on 17 September. Zhang argued that the PRC remains committed to globalization as its economic ascent has been largely made possible under a globally integrated economic system. This global strategy is supplemented by its regional strategies of concluding more free trade agreements (FTA).

The PRC believes that the East Asian community's future relies on three factors: (i) ASEAN, (ii) the PRC and Japan's regional strategies, and (iii) balance of regional architectures. Zhang concluded by elaborating that a larger regional FTA is the ideal. However, reaching a political consensus within a large FTA is still a long way off owing to the nature of the ASEAN community and current economic difficulties. Given these constraints, it may be desirable to facilitate agreements on promoting single window, mutual recognition of standards and rules of origin harmonization as well as promoting foreign direct investment (FDI) to less developed areas.

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