IMF raises China 2017 growth forecast again
beijing — The International Monetary Fund (IMF) on Wednesday raised its forecast for China’s 2017 economic growth to 6.7 per cent, its third increase this year, citing “policy support, especially expansionary credit and public investment”.
In April, the IMF hiked its forecast for this year to 6.6 per cent from January’s 6.5 per cent, which was 0.3 percentage points above the previous projection.
China’s economy grew a faster-than-expected 6.9 per cent in 2017’s first quarter, well above the government’s target of around 6.5 per cent for the full year.
The IMF said it now expects China’s growth to average 6.4 per cent annually during 2018-2020. In April, the fund said it expected 2018 growth to be 6.2 per cent.
Along with a higher growth forecast, the IMF on Wednesday recommended China speed up reforms to transition its economy to more sustainable growth and adopt less accommodative monetary policy.
“The critically important recent focus on tackling financial sector risks should continue, even if it entails some financial tensions and slower growth,” IMF deputy managing director David Lipton told reporters in Beijing.
China needs to ensure that “where credit is granted, it is backing economic activity that will be useful, that will be supportive of growth and will permit debts to be serviced without difficultly,” he said.
Beijing should resume progress towards a flexible exchange rate, Lipton said, adding that the IMF assesses the yuan currency to be “in line with fundamentals”.
The strengthening US economy, albeit with normalising interest rates, is likely to be useful for the rest of the world, Lipton said.
The IMF official said President Xi Jinping’s speech at Davos in January was the start of China playing “a kind of leadership role at a time when there is a dialogue going on around the world about the path of globalisation.”
China’s economy generally remained on solid footing in May, but tighter monetary policy, a cooling housing market and slowing investment reinforced views that it will gradually lose momentum in coming months.
Still, with half a year left to go, Beijing is expected to handily meet its annual 6.5 per cent economic growth target without too many bumps, good news for President Xi Jinping ahead of a major political leadership reshuffle later this year.
Credit and money supply data on Wednesday showed China may be making progress in the battle against risky lending and rising leverage as May bank loans topped expectations but money supply grew at the slowest annual rate in over 20 years, which the central bank attributed to deleveraging.
Off-balance sheet lending, or shadow banking activity, also fell sharply in May after rising earlier in the year.
But the People’s Bank of China (PBOC) said it will balance deleveraging with the need to keep liquidity basically stable, adding that slower money supply expansion could be a “new normal”.
Slower fixed asset investment growth in May and a sharp deceleration in housing starts seen in data on Wednesday point to some of the cooling economists have been expecting. — Reuters