Structural reforms key to spurring growth: business leaders in Davos

Participants were told that monetary policy was not enough to encourage growth

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Stimulating economic growth will require structural reforms, business leaders gathered in Davos for the 45th World Economic Forum Annual Meeting said on Wednesday.

During “The New Growth Context” session, participants were told that monetary policy was not enough to encourage growth.

“Policy-makers shouldn’t kid themselves,” UBS’ board of directors chairman Axel A. Weber told the audience, according to a press release.

“They need to deliver policy reforms, not just loose monetary policy,” he said, citing Germany’s reforms under Prime Minister Gerhard Schröder as an example for the rest of Europe to follow.

Min Zhu, the deputy managing director of the IMF and a WEF foundation board member, said structural reforms “are the only game in town.”

“We need politicians to act,” he said, adding that “worldwide, the whole banking sector is much stronger than a few years ago” but that “the risks have moved into the shadow banking sector.”

John Rice, the vice-chairman of GE, Hong Kong SAR, said: “You don’t have sustainable, inclusive growth unless you have jobs, and you don’t create jobs unless you have good basic infrastructure.”

David M. Rubenstein, the co-founder and co-CEO of the Carlyle Group, said more and more infrastructure projects would be funded by private equity given that governments and banks are no longer funding them as in the past.

“Right now the U.S. seems the greatest place in the world in which to invest,” he said. However, he warned that growth in the United States was leaving many behind is leaving many behind, especially in middle- and lower-income groups.

Zhang Xin, SOHO China’s CEO, said China, unlike Europe, suffered from overinvestment and not enough consumption.

“How do we grow consumption? We need tax reform,” she said.

Although pro-consumption reforms in China are proceeding more slowly than she would like, Xin said that “the anticorruption campaign is working very well.”

There are more than 2,500 participants at this year’s World Economic Forum Annual Meeting in Davos-Klosters, which runs from Jan. 21 to Jan. 24.

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