|New models needed for all: Zhu Min|
As the world is undergoing profound changes, to find new development models is a common task for both developed and developing countries, Deputy Managing Director of the International Monetary Fund (IMF) Zhu Min told Xinhua in an exclusive interview.
As delegates kicked off the first day session of the five-day annual meeting of World Economic Forum in the Swiss town of Davos on Wednesday, voices calling for new models to fit the changed world were repeatedly heard in various discussions.
The appeal was echoed by Zhu.
"To find new models and new mechanism for the changing reality is a common task facing us all," he said, adding that discussions over new models came at the right time.
In recent years, crisis came one after another, from financial crisis to sovereign debt crisis. As the eurozone debt crisis was snowballing, new development emerged: many countries started to adopt fiscal tightening policies.
In the years ahead, it remains to be seen whether the fiscal status in developed countries will go better or worse, a question that matters a lot to global economy, Zhu said.
Changes are also being observed in other parts of the world.
Last year, in terms of Purchasing Power Parity (PPP), the share of emerging economies in global GDP reached 49 percent, which means for the first time, shares of emerging economies and developed economies held almost equal weight, Zhu noted.
Market economy has its advantages, such as in encouraging individual performance and efficient resource allocation, but it also has weaknesses, for example in wealth distribution, he said.
This is the very reason why world leaders are looking for new models in Davos this year, Zhu believed.
He pointed out economies in different stages of development need to look for their own new models.
For emerging economies, a balanced model driven by domestic consumption and relying less on external markets is obviously becoming more and more important, Zhu said.
But for the developed countries, the priority is to create growth that benefits all, he said.
Take the United States for example, in the past 15 years, the wealthiest 1 percent saw their income grow by 270 percent, while earnings of the 20 percent at the bottom of the pyramid rose by only 27 percent, he said.
If the benefit of economic growth can not be properly shared by all, social problems become inevitable, Zhu said.
In many countries, unemployment among youngsters has become a huge problem, as a result of imbalanced labor structure and educational disconnection.
Zhu believed Davos is a good opportunity for emerging economies to better observe these phenomena, in order to achieve economic progress in a better and more balanced way.
Zhu also spoke about the eurozone debt crisis in the interview.
"Eurozone debt crisis is a not only a crisis for Europe, but also for the rest of the world. It deserves concerted effort from all players," he said.
"Chances for default are increasing, which is an illustration of how serious the situation is now," he said.
Barely 18 months ago, only 5 percent of the Credit Default Swaps (CDSs) in eurozone sovereign debt market exceeded 200 basis points, which was within a pretty safe range.
Five month ago, the figure reached 47 percent and now it is already 71 percent. So the situation is deteriorating very fast, which is not only a challenge for Europe, but also for the rest of the world, Zhu noted.
An unstable eurozone sovereign debt market and subsequently an unstable European banking sector will certainly exert huge negative impact over the growth of global financial markets, he said.