Following is the transcript of a CNBC interview with Kristalina Georgieva, CEO, World Bank. The interview was broadcast on CNBC on 21 March 2017.
All references must be sourced to a "CNBC Interview".
Interviewed by Geoff Cutmore, Anchor, CNBC at China Development Forum 2017.
Geoff Cutmore: Donald Trump is raising some interesting questions about the value of the current multilateral trading system we have, whether the IMF, the World Bank, are still going to be relevant going forward. How do you respond to that criticism?
Kristalina Georgieva: Well we have learned from our decades of experience that open economies create better opportunities for people in the developing countries, but also for people in the rich world. They have access to cheaper goods. They have a chance to actually export more when the purchasing power in the rest of the world is going up. But, we also have seen that very rapid shifts have created pockets of discontent, and people there are voicing discontent, this discontent very loudly. What we know is that anger is very loud, and it creates a noise curtain to those many millions who actually would like to see the world to be integrated and interconnected.
GC: But do you feel that you're beginning to be marginalized at the World Bank and that increasingly people are questioning what the role of the organization will be going forward?
KG: What we have received very recently is a very strong vote of confidence at the World Bank, with a record high replenishment of either the International Development Association. This is the resource we use for the poorest countries. We got seventy five billion dollars. And the United States is part of the contribution to this pool of money, because this is where we contribute the most to the security and safety of the whole world. We also continue to be quite relevant in middle income countries right here in China. The demand for the World Bank is very high for our money. Not so significant but for the knowledge, the expertise that comes with the money. And also the chance for us to learn from China and then transfer this knowledge elsewhere.
GC: You mentioned a sense of inequality. It seems that many countries that have run trade surpluses have had a free lunch from the trading system as it's been set up. Isn't it appropriate that countries like China and Germany get told to fall in line if they want to be part of the system going forward?
KG: What we see is in countries where there has been predominantly export orientation of their economies, a process of rebalancing. Here in China domestic consumption is jumping much faster than exports. And the same is happening in Germany. So these countries are recognizing that there has to be for domestic reason and also for their role in the world economy, rebalancing in that direction. The pressure that comes from voices that are saying "hey we rely on you", may accelerate this process but it's happening anyway.
GC: But in your speech here you talked about the need for competition. You talked about the need for proper financial restructuring. You talked about the need for proper restructuring of state owned enterprises and the removal of excess capacity. All terrific messages. But it's happening way too slowly in China isn't it? The reforms have stalled.
KG: What we see in China is moving towards more sophisticated reforms and they're tougher to do. And it is natural for the reform process to slow down when they are stepping into areas of demand and supply side policies, reforming that tax system for example. This is a major undertaking. And actually I think they're right to step into these new areas of reforms cautiously but not to give up. Our message to China is do move towards more sophisticated reforms. This is the only way you can see productivity going up. This is the only way you can sustain growth that is proportionate to the demands of the Chinese economy.
GC: So what's the message to Donald Trump who seems to be willing to roll back a trading system that you say has benefited many. Don't throw the baby out with the bathwater perhaps?
KG: It is a good message. You said it and I think it is one that probably would resonate with many around the world. When we look at the next years what we recognize is that we have gone through a very painful time since the financial crisis the world economy never recovered to the growth trajectory that it had before. And if you think of the reasons for that, it is slow productivity insufficient investment. So the U.S. needs a booster, the rest of the world needs a booster. Let's figure out a way to do it in a more mutually respectful manner.
GC: And part of the problem with the recovery process is central banks have created more debt. They have also funneled the wealth into the pockets of the very rich and many have felt left behind, which is why we have this wave of populism. How did we screw it up?
KG: It is very true that inequality has grown quite significantly, actually with the exception of China where since 2008 more attention is being paid to increasing inequality. And this is a problem that is solvable. Not one that we should just throw our arms in the air in desperation against. What we see is that countries where those who have lost their jobs because of either export or automation are being helped to adjust, have a lower degree of anti-globalization sentiment. So the lessons we should draw, is that if there is a problem let's concentrate on the problem and what is the best solution for it. Rather than deciding that we yes we should throw the baby with the bathwater.
GC: But the solutions at this point don't seem to be coming too easily, and in fact what we have is anger...
KG: And anger is very loud. It makes it impossible to hear the quiet voice of reason. We have to amplify this voice of reason, look objectively in what has made us a more prosperous world over the last decade. And what has gone wrong. Concentrate on fixing it.