 Check, check doesn't want to. Okay, good morning folks. I think we should begin, even though I think as a result of the rain, there are probably fewer people than it registered. We had about 100 people, I think, who had registered to develop countries. So it's a much more inclusive set of countries. But no matter how it's defined, the reality is that Asia has become a driving force in the world economy. When I used to be at the World Bank, we used to always look at the impact of advanced country developments on Asia. And indeed that continues to be true because of unprecedented monetary policies in the advanced countries as well as fortering economies in Europe and a somewhat hesitant recovery in the United States. But now, what happens in Asia is of huge importance for the rest of the world. As we've seen in China, the exchange rate depreciation, the stock market correction had implications that had global repercussions. And so we have to keep a very close eye on what's happening in Asia simply to understand the interaction now between nation economies and the advanced economies. China, I think, is of particular fascination as it happens. You know, Carnegie had a session yesterday on China, and on Friday we're going to have another session on Asia as a whole as well, but a more wide-ranging discussion about the geopolitical aspects of the Asian economies. But what happens in China is of particular fascination as it tries to engineer a soft landing while reforming the economy to a more sustainable growth path. It tries to repair an aircraft in mid-flight. And you know, given the opacity of the Chinese economy, given the fact it's so opaque, and the decision-making process is also so opaque, there are widely differing views on China. And you have, you know, the entire range of views from the highly optimistic, the very pessimistic, and it would be interesting to see how our two speakers today come out on the Chinese economy. There are two of our binomics in Japan, and whether the recent passage of the TPP, the recent successful negotiation of TPP will provide some external disciplinary pressure on Japan and whether that will push Japan to introduce structural reforms in the domestic economy. So to look at all these issues and more, we have two outstanding speakers. We have, of course, Chang Yong-Ri, who is the director of the Asian Pacific Department of the IMF, who will be giving the main presentation. Chang Yong was the chief economist of the ADB before joining the IMF, and I've known him for many years. In fact, we worked together on Myanmar, and I've learned to appreciate his insights and his very pragmatic understanding of what's happening in the Asian economies. And we have Uri Badush from the Carnegie Down for International Peace. Uri has been a longstanding analyst and observer of global economics. He and I worked together in the early 1990s when we started the Global Economic Prospect Series of the World Bank, and I've also learned to appreciate his command over issues related to the global economy. So we have Chang Yong-Ri first. He'll give his presentation. Then we have Uri provide some short remarks on the presentation. I may ask a few questions after that, and then we'll open it up to the audience for a Q&A. Chang Yong-Ri. Thanks very much. Thanks very much. It's my great honor and pleasure to be in Carnegie Down for International Peace and be come to have a very generous introduction. This PowerPoint is based on our regional economic outlook, which was prepared actually before our annual meeting, which just ended a week ago. So maybe a little bit outdated and maybe a little bit long. So let me just go over quickly and then, you know, probably add a few more new things which I learned during our annual meeting at Lima. Can I move down? It's not going down. It's directly to many commodity exporters. An Asia slowdown has to be seen as a part of this global transition. And what surprised us actually is China's slowdown has been expected, but what surprised us more is its speedover from China's rebalancing to Asia and to the rest of the world. And I will explain later the speedovers that we have seen so far is much larger than our econometric studies suggest before. And overall, even though Asia still remains as an engine of growth, vulnerabilities in many Asian economies are rising, especially for those countries which accumulated lots of private debt after the global financial crisis. Let me explain it in more detail later. This chart shows that our revised growth forecast for Asia region for 2015 and 2016, we expect that Asia will grow by 5.4% both in 2015 and 2016. And as you can see, 5.4% is lower than last year, but still the Asia's average growth rate is 2 to 4% higher than growth rate in the other region. So Asia remains as a growth port of the global economy yet. But this average growth rate in Asia masks quite heterogeneous performance across the countries within the region. And let me first say that we maintain our growth forecast for China as 6.8% in 2015 and 6.3% in 2016. That was our April forecast, and despite the recent statistics which show some significant slowdown in their manufacturing sector and their quarterly growth export import numbers, we maintain our growth forecast at 6.8 and 6.3%. Given the huge debate surrounding the China's growth forecast, you may be kind of curious why IMF may not explain the details later. But if you look at the other region, you can see that even though we maintained our growth forecast in South Asia, India and South Asia relatively, we maintained stable. But you can see there is a huge growth forecast revision downward in many parts of the other Asian countries. For example, East Asian countries, countries like Korea, Taipei, province of China, the growth forecast was revised downward by 0.9, but almost 1%. And you can see Asian growth forecast was also quite significantly revised downward. And many commodity exporters such as New Zealand and Australia, those countries also growth rate has been significantly revised downward. So in average, we didn't revise down Asia's growth rate very much because China has a big portion. But you can see that there are several Asian countries which has very close ties with China. Their growth rate has been revised quite significantly. So Asia is quite heterogeneous at this moment. What factors are behind this slowdown in Asia, basically, is definitely China's slowdown, which I will explain in a little bit more detail. And the US lift off and the possibility of capital outflows and then commodity price declines, which I just mentioned. And also there are several idiosyncratic factors in many Asian economies such as political uncertainties in Thailand and Malaysia or these idiosyncratic issues. But today I want to highlight in my presentation the first two factors, China's slowdown and the possibility of the capital outflows after the US lift off. So let me first explain then why we maintain our China's gross forecast. Let me save some time because this slide has so many slides so let me just summarize why we maintained our gross forecast. First of all, I think I have to, this is kind of something self-promoting but we have to say that the IMF forecast in April and last year was a little bit ahead of the curve. Our gross forecast 6.8, 2015 and 6.3, 2016 was relatively a low end of the market forecast compared with other leading institutions. And the reason is that basically we forecast our numbers based on the desirable policy that we are recommending to China. We are recommending to China that the credit-led gross, investment-led gross in the last couple of years, especially after the global financial crisis is not sustainable in the long term. So we recommend them to rein in credit gross and slow down their economy. So 6.8 and 6.3 was already incorporate the possibility of their credit, you know, the less credit expansion. And then in July and August you know that the import and export figures were quite negative and the high-frequency statistics about the hardcore industries, manufacturing especially, shows a dramatic cooling down in the second half of this year. But if you just focus on the gross rate in 2015, in the first half China's gross rate was 7.8, maybe close to 7 and maybe above our 6.8 percent. But that is very short-term, right? What we are more interested in is what is the kind of current trend indicated for the year, next year and the year forward. And many people are shocked by the number, like a 7 or 8 percent, minus 7 and minus 8 percent of slowdown of import and export to China in July and August. But those numbers are nominal figures. If you look at the real numbers, still the real import is like 2 percent, plus 2 percent rather than minus 8, 7 and 8 percent. So most of the nominal decline of the export and import numbers reflect lower commodity prices and lower manufacturing price, goods prices. So it's price effect and if you look at the volume, actually volume is, yes, definitely slowing down and it's not as drastic as many people have seen in the nominal figures. And especially if you look at China's import, even value terms, you see that goods import are really going down fast. But you can see that still the nominal value of import of services is quite high. That actually is consistent with our view that there is significant rebalancing is happening in China. They have all the capacity problem in traditional industrial sector. All the data like electricity use and cement demand, all these hard core numbers which relate to the manufacturing sector is really going fast, faster than we expected. But on the other hand, consumption growth rate and service sector growth rate is still very high numbers like service sector growth is close to 10 percent. And so in some sense, we see the two different trends. Traditional manufacturing sector is cooling down. On the other hand, new sectors, services and consumption still remains as robust. So that given the, you know, import elasticity is much higher in manufacturing sector. That can explain the why the export import, you know, trade sectors are slowing down too. So overall, I think we believe that, you know, China's data has been weak but there is some evidence of rebalancing. And that actually is the main reason why the, you know, the growth rate remains well above 6 percent even though manufacturing sector is slowing down. And this, we believe this trend can continue together with some weak stimulus from the government. And so the other pessimism and the other, you know, some concern on China's economy is their financial market. And you know that recently in China's stock market experienced significant adjustment and then exchange rate and after the August 10 new, you know, new systems introduced and then China's exchange rate depreciated by 3 percent. But, you know, but you have to remember that the China stock prices has increased more than 100 percent in the last one year before the correction in August and then also exchange rate has in real terms appreciate more than 15 percent before it depreciates by 3 percent. So in general we can think about this, you know, the financial market or, you know, the turmoil, mini turmoil in last summer is a kind of adjustment of the, you know, fast, you know, the stock prices, you know, bubbles in probably in China and before. And definitely it causes some concern because people are now start to worry about whether Chinese authorities or the market as many people has believed and now it gives two lessons. One is that the second, you know, the now China's market is no longer segmented. We think that, okay, in trade sector China is well integrated to the global economy. We all know it. But we always thought that China's financial market is more excluded and more segmented from the international financial market. But the reality, we see that we see large speedovers from China's stock market adjustment and FX market. So no longer China is independent from the international market. There are two important lessons but I think we have to see what is happening, what happened to China during the summertime is maybe this is indication of their process of learning by doing. And China will probably learn from this many experiences and may adjust to the new reality that I just explained. But what surprises, as I mentioned, is speedovers and this chart shows that at the time of the stock market correction and the time of the FX depreciation the impact to many Asian economies was much larger than we expected. And let me just skip the slide. And, you know, this shows that on the day of August 10 when China's exchange rate adjusted many Asian economies exchange rate also depreciated together. And then even after August 10 the depreciation trend continues. But on the other hand, I think you have to also shouldn't think that many Asians exchange rate adjustment is purely due to China because, you know, there's a quite different, you know, the exchange rate movement trend in Asia. If you look at, you know, the Hong Kong, Vietnam and some, you know, frontier economies the exchange rate has been tied to dollars and then when dollar appreciated their exchange rate has appreciated together quite a lot. So, you know, when they probably need some adjustment given the weak close trend and, you know, China's load and all these things. So they also need, it was at the time need to adjust the exchange rate too. And at the same time like Australia, New Zealand and, you know, Malaysia and Indonesia who are, you know, commodity exporters and together with the law, you know, the commodity prices some depreciation of their currencies is warranted and should be welcomed as a kind of adjustment to new terms of trade and the exchange rate depreciation can act as a sharp observer. So we shouldn't just say that okay, all Asian currencies depreciate after China's currency depreciation is all due to China. That view seems a little bit too naive and we have to also think about the monetary dynamics within the region. And then, previously I think when we actually estimate our gross focus for many other Asian economies we consider the slowdown, expected slowdown of China's gross rate because we are assuming that China's gross will go down from 7.3% in our econometric studies suggest that if China's gross rate slowed down by 1%, its impact to neighboring Asian countries is around 0.3%. So if you just use the rule of thumb, if you assume that China's gross rate will slow down from 7.3% to 6.8%, it's around 0.5%, and then if you apply by 0.3%, its impact on other Asian countries can be like 0.2%. That was the kind of rule of thumb. In the previous slide, the slowdown of East Asia, in many other countries, except India and South Asia, which doesn't have that much gross ties with China, the gross rate slowdown is well over 0.5%, and even the East Asian countries is close to 1%. So what we are observing is actually the speed-overs is much larger than our econometric study suggests. Maybe I can say that 2, 3 times larger than what I advised me, because we already said that China's rebalancing is good for China, for more sustainable paths, and good for the whole world because China is going to become more safe and they can rely on the consumption that grows that's good for many other economies surrounding China. But what's happening at this moment seems like China's rebalancing seems to have, in the short term at least, has more some unexpected negative impact for several Asian economies. Why so is a question. I think it's unfair to say it's all due to China, because first, definitely China's trade ties with its neighboring countries has become much larger. Through the supply chain China now has this chart shows how domestic value-added embodied in export to China, you can see between 1995 and 2011 China's trade and the value-added creation in many Asian countries is definitely supply chain relationship with Titan, so that is one reason for this larger speed overs. But the slowdown of many Asian economies is also affected by the possibility of the fat lift off and the capital outflows and so far we see that the FDI flow to Asia remains quite stable so we don't see that the FDI is now we don't see much change in FDI even despite the many talks about fat lift off. But on the other hand, portfolio flows show some sign of the outflows already and we actually compare the amount of the inborn markets and we compare it from the period of immediately after QE tapering period a couple of years ago. And you can see that already the amount of capital outflows from the equity market in Asia excluding China and Japan is larger than those compared with the cases immediately after the QE tapering as the right side panel shows. But on the other hand if you look at the bond market still we do not see the outflows from the bonds. So I don't know if the US actually increase interest rate and then the bond market outflows may accelerate but even at this moment I think we are worried about capital outflows but we have a mixed signal. From the equity market there is already significant amount of capital outflows from the equity market in Asia but on the other hand bond market seems to be stable yet. So we have to get what's going to happen in the future. And I skip so basically if I conclude China, they say that their export of agriculture good the gross rate remain quite stable. And Vietnam which actually send some which has a more close tie to Europe and the US rather than China directly and then also they supply some of the intermediate goods especially the cellular phone and other things they say their gross export gross to China still remain high. So you can see depending on which line with China whether the US actually selling more consumption good or intermediate good even though it's intermediate good where you are located in supply chain the impact seems to be quite diverse. It's not it's very hard to say that everyone is losing and or everyone is gaining. So that was a kind of interesting observation. Okay so far it's about the China so I want to say one is that China is slowing down but we believe this is already expected slow down and we are not we don't see that the hard landing is likely scenario even though the transition passes bumpy in the short term. So because they have some policy rooms and also the service and consumption sector is growing. But on the other hand in the medium term whether the China's will have soft landing in the you know the I think I don't know After the global financial crisis in the west and the advanced economies you know fiscal consolidation happens and immediately after the European and US financial crisis public debt increase by significant country and many private sectors actually do the consolidation. On the other hand many Asian economies including China after the global financial crisis to maintain high gross rate they rely on the credit expansion and the private sector leverage increase quite significant country including corporate leverages and you can see that China is one great example and ASEAN is not an exception the private sector leverage has quite significant increase and then some people say that this increasing leverage is a sign of the financial market deepening and there is a desirable need to further develop financial market because compared with the real sector Asia's financial market is a little bit less developed but even after control the GDP level this chart shows that there are several Asian countries whose household debt or corporate debt is much larger compared with even after controlling their income levels in some sense controlling for the financial market deepening as you can see China and Hong Kong has a very exceptionally high corporate debt problem and the Thailand and Malaysia and Korea and others have a high household debt problems which is well known and when we do the sum simulation is a vulnerability because a large share of the corporate debt is owned by the companies whose profit level is quite low so when you calculate the percentage of the corporate debt owned by the companies whose coverage ratio which means how much you can actually pay your interest payments through your earnings under the stress scenarios and so the interest coverage ratio less than 1.5% and then the portion is quite significant for example in case of China if we assume that 20% of the earnings will go down and if the 30% increase in borrowing costs then the portion is in the long term in China given these high leverages what complicates the matters is that now if you look at the different leveraging process between the state owned enterprises versus private corporations we see some evidence that many private corporations do the many leveraging process already but still if you focus on the state owned enterprises the leverage remains still high so this is a dilemma if you want to leverage the state owned enterprise quickly you have to sacrifice the grocery if you don't do it then this leverage problem can be in the long term so China has a very complicated and delicate choices the corporate people is worrying about hard lending but on the other hand if China is worrying about the slow down of gross if they really pump up the stimulus and rely on the credit expansion to maintain high gross rate then they may actually aggravate or they cannot cure this leverage problem which can cause a long term problem so China at this moment is very important moments they have to really you know think about this deliver choice between this trade off maintain the reasonable gross rate but at the same time has to address this leverage problem so that to address the financial stability in the long term so that is a quite daunting task and we hope that China can manage this transition which we call is manageable but bumpy and China one good news is that their dad is mostly domestic there but there are several other countries whose dad is they had some effects denominator so for those countries which has accumulated a relatively large effects denominator they probably have to pay attention for this issue to remain less non-vulnerable considering the possible financial tightening conditions in the future but I do not want to say that if you ask me are you worried about another round of Asia financial in 1997 given this leverage problem my answer is no because so far I just emphasized the leverage ratio but at the same time if you look at the other macro fundamental such as current account and fiscal you know deficit surplus and the amount of reserves they have and especially the corporate leverage ratios and the large liabilities they have accumulated after global financial crisis should remain as a priority policy priorities so we actually recommend them in the next couple of years maintaining some growth rate is important but don't because I'm often chairing his event and so he reciprocates the again thank you for the invitation the opportunity to discuss this succinct and interesting IMF assessment on the prospects for the Asian Pacific region I actually do not have significant disagreements with the analysis presented I have quibbles here and there but I'm going to resist them in the interest of time the most important point to me and the most important message in the in the report is that the slowdown of growth in the region which in any way is moderate in historical perspective is part of a process that is likely to make growth more broadly based more consistent with the underlying growth of productive capacity and therefore more sustainable to me that is the most important message about Asia and as it affects the rest of the world of course the slowdown is the most marked and most worrying in China which has become so important as a result of investors so big and dynamic that it is now receiving the same attention that I remember the United States did when I started in this business 30 or more years ago and that tells us how quickly the world is changing now if China's slowdown was just the result of reorienting the economy towards consumption and export clearly an overdue adjustment we can discuss that too for many reasons if that was the only reason then I would worry I would worry less after all we have a very high rate of investment there's a lot of evidence that some of this investment is quite small in terms of value added in the region dependent export to China what is really happening as well is that this structural adjustment is coinciding with a major cyclical correction of the kind we know and hate the bursting of a major construction and investment bubble investment in heavy industry particularly with a big build up of debt especially in the case of China of corporate debt and on top of that for various reasons China is experiencing a huge appreciation of its real exchange rate so people focus on the devaluation but when you look at the graph what's really happening in China is you've had a gigantic re-appreciation of the real exchange rate over the last many years so you have the structural adjustment you have the cyclical adjustment you have the exchange rate appreciation and this of course means that the long term adjustment that China is undergoing is even more risky and painful than it needs to be when long term investors and households become accustomed to 10% growth which they did over 30 years this becomes part of their spending and business plans and then 6% growth feels very much like a recession there are actually some similarities you don't want to stretch them too much between China going from 10 to 6 and the United States going from 2.5 to negative 1.5 I was once in business I know how important it is that things go according to plan because you build according to plan you invest according to plan so it isn't just the deceleration it is the speed of the deceleration and I think the fact that it took many players by surprise so when I look at those numbers I'm actually not surprised that there is quite a bit of pessimism out there and when you talk to business people some of them are really tearing their hair out and they are not focusing on the 6% growth they are focusing on the rate of change and as we know the things are made somewhat worse it doesn't help the Chinese policy makers who are vitally concerned with their legitimacy for well-known reasons are unaccustomed to managing a pronounced domestically induced business cycle and stock market correction so they tend to overreact or react and they are suffering some of those after effects the cost became apparent much later still all that being said the broader European the middle income countries in the broader European sphere and the low income countries in Asia, Cambodia, Laos Laos, Myanmar are doing much better than the low income countries in Africa that are now seeing a significant slow down reflecting the commodity prices and so peer for peer in the developing countries 2 to 4% growth differential between developing Asia and the rest of the developing countries despite the sharp slowdown in China and the anemic performance of Japan and this to me is a good illustration of the dictum that development is what countries do to themselves not what others do to them good for we have multiple growth poles we're no longer dependent on one we're no longer as in the 1950s to take the extreme example dependent on the United States no we dependent on China today we have at least three major poles or four major poles of economic activity that are reasonably independent of each other United States in North America Europe Japan actually are relatively other blocks from the rest of the world but on the other hand has no policy instruments to act counter cyclically and so Asian countries that are export oriented have some capacity to reorient their economies to domestic demand because of their fundamentals towards their regional partners next door even when China is slowing down or towards the United States and Europe which are finally recovering to the political resistance of unproductive activities such as agriculture and mom and pop operations and services the severity of rental countries in Asia and the depressing effect on investor confidence of confidence is not so much reflected in yields or credit spreads but reflected more in an expectation that at some point you know they have to raise taxes that affects investor expectations so Japan is a good example in my view of the impotence of monetary policy and even of exchange rate evaluation when confronted with deep the slowing of world trade is not due to peak trade globalization or resharing or withdrawal from global value chains nor is it due to ramp and regions most notably Europe which relies disproportionately on international trade of final products parts of machinery and raw material more recently and this is important it has spread to commodity exporters many of them dependent on China this obviously impedes trade further because many of these commodity exporters no longer have the revenues to buy to buy stuff from different parts of the world and that's basically the adjustment that we're witnessing the slowdown in trade however and I think this is in your report as well is also partly the result of the end of transition the boom in world trade in the 1990s and early 2000 was in part the result of the incorporation into the market economy of China and many other countries in a book that we recently published Cheydo Zachary and I on WTO accessions we note that the accession countries to the WTO, 32 of them more than double their share of world trade since the inception of the WTO actually 127 percent including China the increase in market share and excluding China 40 percent now that transition is largely done okay we're not going to take Russia and China and Vietnam into the global market economy again we have largely done that but this cannot be read should not be read the combination of cyclical and one time historic shifts as the end of globalization there are many reasons technologically I won't go into technological in particular and the rise of many low income countries that are still becoming they are part of the market economy but they're having a disproportionate impact on international trade because of the middle class in these countries there are a number of factors that are at play that are going to make international trade and foreign direct investment taxiservice can get globalized because of Uber okay what else you know what is it that doesn't get globalized okay so obviously this the continuation of this process raises the stakes on Asian countries to improve their international competitiveness and to participate in trade agreements good or bad for me it's better than no trade agreement thank you I have a lot of questions but I'm going to resist the temptation of asking them perhaps I'll interject in the course of the discussion we've only got 30 minutes left so I want to open it up to the audience I know we have some real heavy hitters in the audience and I'm sure they'll ask some really good questions let me recognize you then wait till you get the microphone provide your name and your institutional affiliation remember that this event is being streamlined so it's very important that the question is heard and then we'll go from there alright somebody at the back which states the prospect of the U.S. Federal Reserve gradually raising interest rates points to an unprecedented unprecedented adjustment in the global financial system unprecedented is a striking word we've had 1987 we've had 1929 and if you look at the debt that we've just been discussing not only in China and Japan what does thank you okay well why don't you I mean what channel we're saying is he doesn't recognize that statement he's not sure it doesn't come from his document can you tell us which document fair enough which document does it come from okay yeah sure yeah can you repeat that that sentence this is the sentence the prospect of the U.S. Federal Reserve gradually raising interest rates points to an unprecedented adjustment in the global financial system the sentence goes on but that's keep it short two specific questions for me to interpret I don't know this is an official view but I just if I think about you know if I just stick to the sentences especially its impact on the Asian economies I think in terms of magnitude you know the amount of the QE and the capital influence and its impact during the QE period and that impacts are so large at least from an emerging market perspective the sentence is that considering this magnitude probably this is a kind of unprecedented impact in fact I would actually support that I also haven't seen the statement before but the reality is that there's such a large stock of liquidity out there as a result of QE from both from the United States from Europe and from Japan that now any shift in interest rates represents a heal to the institution so it's it represents a very large shift and that makes it I would suspect that makes it unprecedented so maybe we have to say potentially unprecedented right so there's somebody here thank you I'm Jennifer Lee I'm with Hong Kong Feeding's TV I have a question about the hard landing and soft landing you mentioned in your speech so you said in the short term something is happening and you think the slowdown is manageable you mentioned in the speech also you said that soft landing if they can have a soft landing mid-term is still a question so what's the risk on your mind that they might face a hard landing in the mid-term thank you I said I said I said it's unlikely I won't say that you want so it's unlikely because I believe that if you think about one or two years so you know there are many policy rooms they can react and also there's some evidence that the rebalancing and consumption and service sectors also is remain groceries remain robust so in the short term because of that I say it's unlikely to have a hard landing but the main reason why I mentioned that still if you have a medium-term perspective the slowdown the road it will be indaginously determine what kind of policy they will implement from now on so that's the point we have many policy rooms but if they focus on maintaining a very high gross rate and relying on the previous way of maintaining the gross rate after global financial crisis which is basically credit expansion then the leverage problem I mentioned will remain the same or even become aggravated then may cause us some more problems that is very critical to determine the medium-term perspective but there is a further issue Chang Yong isn't there if you and you said that China is beginning to rein in credit expansion and you said that that was a good thing something that the IMF would say it was an appropriate response but if the underlying the underlying structure of credit continues to go to state enterprises and relatively inefficient firms and if you notice in your leverage graph the leverage of the private sector is declining where the leverage of state enterprises is rising that difference could continue in other words it's not just the amount of credit that is going in it's the quality of the credit so what is happening to the quality of the credit in China is China really introducing reforms that will improve the quality of credit and the productivity of investment that is actually a question that will focus on their state-owned enterprise reform and then the issue that you raise is even though they rely on new investment we are not saying that they really reduce the investment you know across the board the investment must be more on the new engine of growth and new industries and where the new demands come in rather than maintaining the old you know industry supply but do you have any confidence that this is going to happen that is a question I think it's a depends on the you know some grocery and this adjustment has to be gradual and you know for example this old industrial sector is concentrating northeastern part of China so it's not just for the economy issue but also the regional development issue and political issue too and if you remember that early 2000 when they have state-owned enterprise problems after the Asia financial crisis but at that time it was relatively I wouldn't say easy but relatively clear what to do because at that time the problem was mostly small SOE has a lot of problem of profitability so the solution was at that time was something because now this is a problem with large scale SOEs and there is a political incentive to make it survive but if you make it maybe you can avoid Asian financial crisis type of collapse but on the other hand you may have a danger of really going down losing the loss of efficiency and really going down the potential GDP rate can be quite low so this is a bad scenario Chinese authorities fully understand this problem they are announcing many reformers and so how they reform the state-owned enterprises especially in the country but on the other problem can coming in so this is a very delicate balance and you have to you know manage this both in some sense smooth transition but at the same time focus on the quality not to make your old industry just to survive they need to contribute to moving resources from old industry to the new industry Peter the financial market is much open and they have more chance for the foreigners to take the capital out I think the chance that capital out is relatively limited at this moment in China and that is why we think that they have room to manage this slow down compared with other countries Thanks Uri Peter I don't have the numbers in my head when I when I looked at the numbers I was very impressed by first of all the size of the sector at the starting point I don't remember the numbers but much larger for example in Ireland and Spain 60% of GDP rising debt levels of the state-owned enterprises this is all quasi-fiscal or fiscal however it is done or the encouragement on the state policy banks on the policy banks to expand credit et cetera et cetera these are all stimulative measures however you want to describe them if they were not there then we may not be seeing 6% so you have to think of an economy that went in an autonomous way from 10% growth to somewhere near 4% growth or something like that before the government actually counterbalance and that tells you the massive effect this has had on companies and has had on individuals on households and is totally consistent with a crash with some GDP construction at the peak at that time we had 2 million housing starts that was about 2006 today 10 years later almost housing starts are doing better we are up at 1.1 million 10% I think already China's financial linkages with Asian economies is growing quite rapidly if you go to Cambodia for example you can see many operations of the Chinese bank in Cambodia yes they rely very much on the dollar but eventually when SDR becomes more let me become more SDR currency internationalized more the usage of the main there are lots of trade linkages so even for the settlement currencies it can be used once the reminibu is increased then I think this financial channel whether it's positive or negative speed overs from the Chinese economy on Asian financial market we have to say it's expected to grow and then the other thing is that China has many bilateral swaps with many Asian economies already and then if the reminibu become SDR basket in some sense those reminibu denominator swaps can be regarded as a part of reserve then I think it can have an implication for the regional or global state so it's hard to how fast it's going to happen but reminibu inclusion in SDR basket can be significant impact in Asian the dynamic whether it's going to be included or not I want to make clear whether they will be included or not will be decided by the board there's a lady behind, yes Hi, I'm Carol Penn from Taipei Economic and Cultural Representative and I have one point and one question for Mr. Lee and my point is that Taiwan is now province of China because Taiwan right now is governed by the government of the Republic of China so I hope that in the future representation Taiwan can be addressed more appropriately and my question is do you think that TPP can reduce the spillover from China can avoid the Asian country avoid the spillover effect or shocks from China's slow growth rate Thank you, in fact that was an issue that we wanted to raise the impact the TPP was but also how would it impact the region as a whole we haven't talked about the TPP yet before I go to I said Taiwan province of China did I make some mistakes officially I mentioned Taiwan province of China so I'm very understanding this is very sensitive issue so I didn't make a mistake in seeing Taiwan province of China but as for the TPP I think this is related with Uri's point about why the global trade I think he actually excellent presentation of the many regions why global trade is going down but in my opinion another factor is that maybe in many FTAs and trade agreement lower hanging fruits is already being taken now unless we really raise the level of ambition maybe the marginal impact of having one or two more trade negotiation regional or global maybe can be quite marginal in that sense I think TPP I have a very high expectation of TPP because TPP is a first trade negotiation within the region which discuss quite sensitive issues such as the opening of service market you know procurement and the property right and in some sense those are the things which are very hard to Asian policy makers volunteer to address and solve by themselves and having this TPP address this issue yeah on TPP I like to say that it's like Coca Cola it's a great global brand but you don't know what is in it and that's part of the problem in discussing TPP at the moment so I agree that it goes into a number of new areas etc but until we know what is being said in these you know the negotiation on rules whether it's state owned enterprise government procurement investor state dispute settlement liberalization of services what it says about investment until we can actually look at the details it's very difficult to claim that we are breaking new grounds there are many trade negotiations going on including by the way the ones that are least noticed and that are often the most innovative in terms of new rules and new approaches are the accession negotiations in the WTR I mean China passed something like 3000 domestic laws in consequence or related to its WTR accession protocols and many of them many of these protocols include what's called WTO plus which are rules that go beyond or provisions that go beyond traditional WTO disciplines so let me stress that what I said at the end of my talk even a bad trade agreement is usually better than no trade agreement so I'm happy that we have TPP but two things before we sing victory about the rules let's understand what is in it and how far they've really gone I'm a little skeptical in that regard on most parts but again I'm operating on the basis of hearsay and the second the second point to stress on TPP is that it actually will do very little new trade liberalization despite the the USTR line about 18,000 taxes on US exports the people who have done the analysis conclude that the impact on welfare of TPP tariff liberalization is absolutely minimal for the vast majority of the parties for the simple reason that trade is already largely free in the states has trade agreements already with six of the 11 partners in the TPP but it does seem that it will have a significant in Asia and that is Vietnam Vietnam and Malaysia so it will have some impact there but in the aggregate in terms of new trade liberalization in the Pacific area it really is at the margin for the vast majority of countries well you'll be put out of your misery soon because the text is going to be released literally in a few days probably next week so we'll all take our trade trade we've got to stop because we've run out of time and John Kerry is going to be speaking in this very same room in an hour's time and we have to leave because there's got to be a security sweep and the security folks outside already and I promise that we'd finish at 11.30 and that is my duty so thank you all for coming and please join me in thanking our two speakers for today thank you