IMF says 'pre­ma­ture' to speak of Chi­nese cri­sis

The Pak Banker - - FRONT PAGE -

China's eco­nomic slow­down and a sharp fall in its stock mar­ket her­ald not a cri­sis but a "nec­es­sary" ad­just­ment for the world's sec­ond big­gest econ­omy, a se­nior In­ter­na­tional Mon­e­tary Fund of­fi­cial said to­day.

Fresh ev­i­dence of eas­ing growth in China ham­mered global stock mar­kets on Fri­day, driv­ing Wall Street to its steep­est one-day drop in nearly four years.

"Mon­e­tary poli­cies have been very ex­pan­sive in re­cent years and an ad­just­ment is nec­es­sary," said Carlo Cottarelli, an IMF ex­ec­u­tive di­rec­tor rep­re­sent­ing coun­tries such as Italy and Greece on its board.

"It's to­tally pre­ma­ture to speak of a cri­sis in China," he told a press con­fer­ence.

He re­it­er­ated an IMF forecast for a 6.8 per­cent ex­pan­sion in the Chi­nese econ­omy this year, be­low the 7.4 per­cent growth achieved in 2014. "China's real econ­omy is slow­ing but it's per­fectly nat­u­ral that this should hap­pen ... What hap­pened in re­cent days is a shock on fi­nan­cial mar­kets which is nat­u­ral," he added.

China's stock mar­kets have fallen more than 30 per­cent since mid-year. Fol­low­ing a slew of poor eco­nomic data, Bei­jing de­val- ued the yuan in a sur­prise move last week. Cottarelli said the IMF would dis­cuss in com­ing months with Chi­nese author­i­ties their de­ci­sion to weaken the cur­rency. China is ea­ger for the yuan to join the IMF's Spe­cial Draw­ing Rights bas­ket of cur­ren­cies. But the fund is con­sid­er­ing ex­tend­ing the cur­rent SDR bas­ket by nine months un­til Septem­ber 30, 2016. Turn­ing to Greece, which is head­ing to an early elec­tion in Septem­ber, Cottarelli said the IMF would de­cide in two or three months whether to join the latest in­ter­na­tional res­cue ef­forts.

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