There is concern among investors that rising borrowing costs in the United States will have big knock-on effects for China and other emerging markets in Asia.
Zhang said there are still huge development needs to be addressed.
“We recognize in terms of development of these emerging-market, low-income countries, is they have huge development needs, but they also need to pay attention to how to better use these monies in a smart way (and) make sure these public sector spending or new borrowings can be sustainable.”
During the IMF meeting, Managing Director Christine Lagarde referenced JFK’s warning that people should mend the roof while the sun is shinning, in anticipation of the rains to come. According to the Fund’s financial stability report, emerging markets could be vulnerable if equity and property prices fall.
Zhang acknowledged that having grown so quickly in the last decade, emerging markets are in a much stronger position than 10 or 20 years ago, when the Asian financial crisis hit. But that’s not to say problems couldn’t arise with the expected increase in global interest rates.
“It’s a real test coming,” Zhang said.
