Tsinghua University, Beijing, March 23, 2014

AS PREPARED FOR DELIVERY

Good afternoon— Xia Wu hao! 下午好！

It is a great privilege to come to Tsinghua University: one of the oldest and best universities in China—and one of the most beautiful in the world! It reminds me of the famous phrase in China, Tian Ren He Yi, Harmony of Human Beings and Nature, 天人合一. This concept of “Harmony”—between the environment and people, between China and the world, between the present and the future. Between you and me! This is what I would like to discuss with you today.

Let me thank Ms. WU Xiaoling for her warm welcome. I would also like to acknowledge the presence of Mr. CHEN Jining, President of Tsinghua University; and Ms. HU Xiaolian, Deputy Governor of the People’s Bank of China. And thank you all for being here today. I see in your faces not just the youth of China, I see the future of China—and the future leaders of China.

This is not so surprising since, after all, Tsinghua is the Alma Mater of some of China’s most influential leaders—Xi Jinping, Hu Jintao, Zhu Rongji and Zhou Xiaochuan; renowned academics—two Nobel Prize winners in physics (Lee Tsung-Dao and Yang Chen-Ning); and top-notch professionals in science, engineering, and many other fields.

Visiting China, as I do often, it is almost like watching its success story unfold before my eyes. In the span of just one generation, China has transformed itself from an inward-looking, less-developed economy into a manufacturing powerhouse and the largest trading nation in the world. Over this period, per capita income has increased nearly twenty-fold, and more than 500 million people have been lifted out of poverty.

In many ways, Tsinghua’s motto “Self discipline and social commitment” embodies the spirit that has distinguished China’s success—diligently building on the past in pursuit of an even better future.

So what is next? As China grows to become the largest economy in the world, you will be the next generation of global leaders—in business, in government, and in civil society. What an exciting prospect! But also, what a great challenge!

In that context, let me discuss three topics:

(i) The 21st century world that you are entering

(ii) How China can make the most of this new world

(iii) The importance of global citizenship

 1. The New 21st Century World 

Two defining features of today’s new global economy are the rise of Asia and the power of interconnections.

Less than fifty years ago, the emerging markets and developing countries accounted for less than a quarter of global GDP. Today, it is half and rising rapidly—very likely to two-thirds of global GDP within the next decade.

Asia, and China in particular, are key drivers of this astounding growth. With it comes the remarkable rise of a global middle class—the rising aspirations of global citizens. In fact, some studies claim that the global middle class will exceed 5 billion people in 2030—up from only 2 billion today.

 Just as this new global economy will continue to expand, it will also continue to draw closer together. Countries today are interconnected in ways that would have been unimaginable to your mothers and fathers when they were your age.

Think of trade: not only has global volume grown exponentially, but so have global supply chains—with more than half of total manufactured imports now “intermediate”—made from components from different countries. As the manufacturing hub of the Asian supply chain, China is at the vanguard of this trade integration.

The same is true of financial flows. In the two decades before the crisis in 2008, global bank lending—as a share of world GDP—rose by 250 percent. As more countries, like China, open up to the global economy, these financial flows will increase further, and will take different routes and pipes and connections. (Internet banking is around the corner).

The power of interconnections is perhaps most visible in communications. Some call it the “hyper-connected world”—and once again, it is driven in large part by Asia and other emerging economies. Today in China, for example, virtually everyone has a mobile device–and thus a potential connection to the internet, and a potential connection to the world.

So a new and exciting future is being forged even as we speak—or perhaps I should say even as we tweet! It is a world of limitless opportunities and amazing potential. We are used to labels that say “made in China”. But this world is truly “made for China”.

2. How China Can Make The Most of This New World

Which takes me to my second point—how can China make the most of this new world? I see three major dimensions:  “think services, think inclusion, think green.” What do I mean?

 (i) Think Services

China’s current growth model has made it the manufacturing hub for the world. But this can only take you so far. China must now take the next step—moving further up the value-added chain with a services sector driven by productivity and innovation. For this, a top-notch education system and a modern, globally integrated financial system will be key.

Certainly, China has made significant strides by investing in education and knowledge-based activities. The resources allocated to research and development have been raised to 2 percent of GDP—at par with many advanced economies. China now ranks first globally in terms of assessment in reading, mathematics and science.

Great progress—but to continue to nurture innovation, these investments must be sustained and expanded. They also need to be “internationalized”—to benefit from greater collaboration and knowledge exchange across countries.

Innovation and enterprise also require a modern, resilient financial sector that can bring together savers and entrepreneurs to produce new incomes and jobs. China has vast savings and is already home to some of the largest banks in the world. Further measures to open up the financial system will turn domestically-oriented institutions into global players.

And as future supervisors and regulators of this integrated financial system, you will need to ensure that these players abide by rules that safeguard financial stability—both domestic and global. That is a big lesson we all learned from the financial crisis.

(ii) Think Inclusion

In many parts of the world, economic growth has come at the expense of rising inequality. China is no exception—disparities between coastal and inland areas, rural and urban regions, and even between the rich and poor within rural areas and cities.

Recent IMF studies have shown that unequal societies grow less, and when they do grow, growth is less sustainable. Inequality also erodes the social fabric.

Improving access to education, health care, and financial services can be powerful forces in overcoming inequality. The right kind of redistributive policies, such as progressive taxation and a strong safety net, can also help.

As Lao Tzu wisely said: “The most empowering way is to inspire people so that they become able to realize their own potential.”

What about gender inequality? By several measures, China is virtually at par with advanced economies. At 46 percent of its labor force, China’s women are advancing at rates nearly as strong as its overall expansion.

In Chinese companies, nearly 20% of CEOs are women. This is compared to only 4 percent of women in the Standard and Poor’s 500 companies. So women in China are certainly making their mark.

Yet it is important to remember that some women are still left behind. Many women in rural China, for example, are eking out a living while shouldering heavy domestic responsibilities. If China is to realize its nearly boundless potential, it must remove these obstacles.

I would like to call on all women students here today to advance—and to bring along other women to succeed as well. I would like to call on the male students to support this as well—because it is a sound investment in your families, and your future.

My main point here is that by making growth more equitable and inclusive, it becomes more sustainable. And more sustainable growth is good for China—and good for the world.

You can help guide China to a more inclusive and more sustainable future.

 (iii) Think Green

China’s tremendous strides in economic development have come with a heavy price tag—poor air quality, water shortages, and rising desertification.

By 2030, China’s cities will have added 350 million more people—more than the entire population of the United States today. Five million buildings will be built; 50,000 of these will be skyscrapers—the equivalent of ten New York cities.

How is all this to be managed?

The good news is that China has taken important steps to improve its environmental footprint—from spearheading innovation and implementation of renewable energy, to legislation to curb polluting industries. But as those who study, live, and breathe here in Beijing know only too well, there is still a long way to go.

You can help China to get there. You can be the innovators who will find new ways to grow, while keeping your communities’ air and water safe. You will be the business people who do not just follow, but lead in shaping regulation and environmentally responsible business behavior.

As future leaders, I urge you to be China’s “green conscience.”

3.  The Importance of Global Citizenship

Which brings me to my third and last point—the importance of citizenship, especially global citizenship. In our fast-paced, interconnected world, success will depend, more than ever before, on recognizing our common challenges and our common hopes.

Think about climate change. We all breathe the same air, the same seas wash across all shores. We all rely on the same sun to warm us, the same rains to feed us, the same waters to nourish us. We need to protect these resources before they turn against us.

I have called for a stronger form of international cooperation—a “new multilateralism” for the 21st century—to help us all adapt to this new world that is more interconnected, yet more dispersed in terms of power and decision-making. Increasingly, again as I have argued, a country’s own success will depend on how effectively it cooperates with others.

And when we speak of cooperation, we must speak of the IMF. It is the premier forum for economic cooperation in the world today. We do this through our annual check-ups of every country’s economy (we call this “surveillance”); through lending to countries in their time of need; and through capacity building and technical assistance.

Above all, we help analyze the “spillover” effects of one country’s policies on others. In the future, we feel this will be one of our most valuable contributions in the interconnected global economy.

I am very proud of the great partnership between China and the IMF. As one of our founding members, we have walked the road together in the 70 years since the IMF was founded: helping each other, and also learning from each other’s experience.

We will continue to be by China’s side as it strives to fulfill its “dream”.

Let me also mention that Chinese nationals are already making their mark in many international institutions, including at the IMF.  We have benefited from the deep talents of Chinese staff at both senior management level and on our staff.

I am particularly grateful to Deputy Managing Director Min Zhu for his insights and dedication; to Jianhai Lin, Director of the department that supports our Executive Board representing 188 member countries; and of course to our very capable Executive Director for China, Tao Zhang, a graduate of Tsinghua University! We also have five graduates from Tsinghua. We continue to replenish our pipeline through recruiting talented young Chinese graduates into our Economist Program and at mid-career levels. I encourage you all to consider joining us!

As the future leaders of China, you have a special role—both your legacy and your destiny. It does not matter so much whereyou work; it is more how you work and the values you bring to it.

Conclusion: Global Leaders, Global Citizens

Let me conclude.

 A wise Chinese proverb once said: “Each generation will reap what the former generation has sown.”

China has already established its leadership position in the global economy. As the country continues to grow, its global leadership will become even more important.

As future leaders, you will be the architects of China’s bright future and heirs of its vast potential. And as global leaders, you will make a unique contribution not only to China, but to the entire world.

You will become global citizens. Embrace it.

Thank you, Xie Xie. 谢谢。