Speaking at a conference in Jakarta on the future of Asia’s finance today, Christine Lagarde expressed concern that the stock market chaos in China, continued slow growth in Japan and falling commodities prices could cause problems for the region.

She praised the region’s use of the lessons of its experience of the 1997 Asian financial crisis to weather both the 2008 global financial crisis and the 2013 so-called “taper tantrum”, which occurred when the US Federal Reserve first signalled that the central bank’s quantitative easing programme was coming to an end.

“By putting in place strong macroeconomic policies and strengthening your financial systems, you withstood instability,” she said.

But she said governments in Asia needed to be ready to take further action and develop tailored fiscal policies for sustained economic growth.

The IMF chief cautioned that the impact of poor roads, railways, ports and water and electricity supply could cause wider problems for Asia’s economic development.  

“That calls for strengthened fiscal policies—something the IMF can assist with—including careful planning, effective spending controls and improved mobilisation of tax revenue,” she said.

The Asian Development Bank estimates that Asia’s infrastructure needs will be $8.3 trillion over the next decade. But Lagarde said “public money is not enough” to achieve the region’s infrastructure needs.

“Infrastructure also requires capital markets to provide new sources of private financing—including risk capital from infrastructure funds that can be sold to long-term investors. It requires credit insurance,” she said.

“That said, private investment—and this does not apply to infrastructure alone—also must be built on the foundation of an attractive business environment. That means improved governance—well-designed and transparent regulations and an intolerance of corruption. This can strengthen the expectation that risk and return will be able to achieve the right balance.”

She also said better access to financial systems, which shifted away from traditional banking practices, would enable new trade opportunities and boost the productivity of a growing labour market. She also noted that consumers would benefit from new financial services like home mortgages, auto financing, insurance products and pensions.