Christine Lagarde, the managing director of the International Monetary Fund (IMF), has given China’s leadership a harsh dose of reality by laying bare the challenges it faced transforming into a service-led economy.
Ms Lagarde called China’s ability to deliver structural reform a “massive undertaking” as she underscored the challenges of its economic overhaul.
The Asian powerhouse is seeking to leave behind its reliance on heavy industry and transform itself into an economy driven by consumer consumption and services.
“[It] will take a little time but we believe [China] will deliver… I have no doubt it will happen,” Ms Lagarde told an audience at the World Economic Forum in Davos, Switzerland.
She also said that China should communicate better with financial markets. China’s stock exchanges have had a rollercoaster ride over the past six months, with authorities trying various measures to stem the volatility of the main Shanghai share index.
Ms Lagarde’s comments came as she won George Osborne’s backing for her reappointment as managing director of the IMF for a second term. “At a time when the world faces what I’ve called a dangerous cocktail of risks, I believe Christine has the vision, energy and acumen to help steer the global economy through the years ahead,” said the Chancellor, who also nominated Ms Lagarde for her first term in 2011.
Other European countries backed her nomination, including Germany, the Netherlands, France and Spain.
Asked about the nomination, Ms Lagarde said she was honoured but did not want to confirm whether she would agree to stand again.