Income and gender equality can boost Hong Kong's economic growth, says IMF's Lagarde

When Christine Lagarde says Hong Kong should adopt social and economic policies to enrich a broader swathe of society and empower more women, she says it with a passion that one does not expect from the leader of a dry financial body such as the International Monetary Fund.

The tall, charismatic Frenchwoman stresses her economic prescription is based on hard technical research by IMF economists rather than her own idealism or personal views, but she is plainly more fired up by this topic than were any of the men who preceded her as IMF managing director over the past 70 years.

“I am also passionate about drier things [such as] making sure that the financial sector is properly regulated, properly supervised, that we do not let the excesses and the abuses we saw in the early 2000s be repeated,” she says during an interview in a plush suite at the IMF’s offices in Paris. “But … on issues such as inclusion, reduction of inequalities and greener growth, I am personally passionate, yes.”

Governments in Hong Kong and elsewhere should remember, she says, that all the evidence suggests that greater income equality, gender inclusion and “green” growth leads to stronger and more sustainable economic growth.

“Certainly diversification and better inclusion would not hurt Hong Kong,” she says.

On the issue that keeps Financial Secretary John Tsang Chun-wah awake at night – the possibility that our fiscal reserves may, at some point in the far future, dwindle to nothing – Lagarde says the IMF is frustrated by the trend among the governments of developing and “peripheral” economies to stuff full their coffers, rather than using those assets to boost consumption and investment in a way that would help the global recovery.

However, she says, the issue is clouded in Hong Kong’s case by its unusual role as a relatively small but open economy with a large financial sector.