A: The key policy challenge is to rebalance the economy away from investment and exports and towards consumption. Its importance, I believe, is fully recognized by the Chinese government. And, given the collapse in global demand, this task has become more urgent than ever.

So now is a good time to implement measures to achieve this rebalancing. The government has announced welcome policies to strengthen the social safety net and improve the education and health care systems.

These will be helpful for boosting consumption and rebalancing the economy, and I see scope to do even more in this area. Such measures have a double payoff: First, they support growth during these challenging times and, second, they make growth more sustainable.

As we study episodes such as the Great Depression so as not to repeat those mistakes, a few clear lessons for today stand out so far. First, that coordinated global action is needed now to repair banks' balance sheets, remove funding strains, and restore cross-border capital flows. And, second, that we must avoid protectionism, both in trade and in financial markets.

As for China, the current global economic crisis highlights the importance of rebalancing growth toward consumption. A Chinese economy with growth driven more by domestic demand and less by exports would prove to be more resilient and sustainable.

Q: What is your comment on China's stimulus package?

A: I am very encouraged by China's fiscal stimulus package. We have been arguing for fiscal stimulus around the globe from countries that have the capacity, and China is leading by example through the government's strong and prompt fiscal response.

I would add, moreover, that China has the room to act forcefully now because it has followed responsible and prudent fiscal policies for many years, with low deficits and low government debt. The Chinese people are now reaping the benefits of the fiscal discipline as it means the government can afford to act forcefully now.

The package announced last November was sizeable and appropriately targeted infrastructure and social expenditure. I also welcome the more recent policies to substantially increase spending on health care, boost job creation, and lower the tax burden. These types of policies help to both fight the economic downturn now and to rebalance the economy over time. The government recognizes the value of promoting consumption and is indeed doing many of these things.

Q: The IMF said there were three levels of failures that led to the global crisis, and IMF also made some mistakes, so what kind of lessons will the IMF learn from the current crisis?

A: The global crisis has revealed flaws in key dimensions of the current global architecture, but also provides a unique opportunity to fix them.

On the flaws, surveillance needs to be reoriented to ensure warnings are clear, successfully connect the dots, and provide practical advice to policy makers.

An effective forum for policy makers with the ability and mandate to take leadership in responding to systemic concerns about the international economy is key.

Ground rules for cross-border finance need to be strengthened. And, given the growing size of international transactions, resources available for liquidity support and easing external adjustment should be augmented and processes for using them better defined so they are more readily available when needed.

These are all ambitious undertakings. But the damage wrought by the crisis provides an opportunity to make progress on seemingly intractable issues. The moment should not be missed.

(Xinhua News Agency April 1, 2009)