Interview: China's growth contributes to Chinese, global financial stability, says IMF official

Fabio Natalucci, deputy director of the Monetary and Capital Markets Department at the IMF, attends a press conference in Washington, D.C., the United States, on April 11, 2023. China's economic growth is important for both Chinese and global financial stability at a time when the global financial system is showing considerable strains, an International Monetary Fund (IMF) official has said. (Xinhua/Liu Jie)

WASHINGTON, April 16 (Xinhua) -- China's economic growth is important for both Chinese and global financial stability at a time when the global financial system is showing considerable strains, an International Monetary Fund (IMF) official has said.

"I think growth is a crucial recipe for financial stability. There cannot be financial stability without growth, it's a super important point to make," Fabio Natalucci, deputy director of the Monetary and Capital Markets Department at the IMF, told Xinhua on Wednesday.

"So growth in China, it's important for Chinese financial stability. As a part of the global economy, it's important to restore growth at the aggregate level, as well as to contribute to financial stability," said Natalucci, who is responsible for the Global Financial Stability Report (GFSR).

China is an important global player, due to its contribution to global growth and participation in the global financial market, said Natalucci. "So China clearly has to play an important role in trying to address these financial stability concerns," he said.

"What we're seeing essentially is a financial system, a global financial system that is being tested by this new environment of higher rates and higher inflation. That's why we think that financial stability risks are increased now," he said.

"The big question is whether rates and inflation are going to stay higher, what particular interest rate level, or whether we're going to go back to what we were used to pre-pandemic? This is going to affect risk-taking and also the vulnerability in the financial system," said Natalucci.

There is a need to analyze what happened in the banking sectors of countries like the United States and Switzerland from an internal risk management perspective, from a supervisory perspective and from a regulatory perspective, he said.

"It's important to keep in mind that the stocktake also needs to be done at the global level, because how some of these financial institutions behave has an impact and repercussion across the globe," Natalucci said.

Multilateral efforts should be strengthened to reduce geopolitical tensions and economic and financial fragmentation on which the latest GFSR had a chapter, said Natalucci.

"There is a cost policymakers need to be aware of and those costs come in terms of cross-border capital flows, in terms of the health of the global financial system, as well as in the ability of investors to diversify risk. So that cost of financial fragmentation, it's something that needs to be considered very carefully," he said.

He suggested international regulatory and standard-setting bodies, such as the Financial Stability Board and the Basel Committee on Banking Supervision, should continue to promote global financial regulatory standards to minimize financial fragmentation.

Climate change policy is another area where Natalucci thought "global coordination and cooperation, multilateralism approach are important."

"Climate change is a global threat. Climate policy taken by one country, one jurisdiction impacts other countries as well. Increased climate change affect everyone. So I think their coordination in terms of response is crucial." 

Fabio Natalucci, deputy director of the Monetary and Capital Markets Department at the IMF, attends a press conference in Washington, D.C., the United States, on April 11, 2023. China's economic growth is important for both Chinese and global financial stability at a time when the global financial system is showing considerable strains, an International Monetary Fund (IMF) official has said. (Xinhua/Liu Jie)