Expected GDP Slowdown Is Beneficial to China, Says IMF, as It Reflects Quality-Based Growth
Xu Wei
DATE:  May 18 2018
/ SOURCE:  Yicai
Expected GDP Slowdown Is Beneficial to China, Says IMF, as It Reflects Quality-Based Growth Expected GDP Slowdown Is Beneficial to China, Says IMF, as It Reflects Quality-Based Growth

(Yicai Global) May 18 -- China's reforms have stabilized the economy and financial deleverage has made progress, said the International Monetary Fund, IMF, in its latest Regional Economic Outlook for Asia and Pacific. This year's expected slowdown in GDP growth in the world's second-largest economy indicates transition into quality growth from quantity-based one, said the international financial institution.

With financial, real estate and fiscal austerity measures achieving effects, China's economic growth is expected to slow down to 6.6 percent this year from 6.9 percent last year, the IMF predicted. This slowdown is necessary and beneficial to China in the long run because it reflects the shift from an emphasis on growth in quantity to quality, it noted.

China's consumer price inflation is expected to rise to 2.5 percent this year from 1.6 percent last year, but it is still not high and in line with the regional trends, it said in the report.

China's reforms over the past two years have reduced near-term risks and achieved economic stability. In particular, progress has been made in the financial deleveraging process and work in this area should continue, it added.

The regulations on asset management products and new liquidity rules China has introduced are welcome and should help to further eliminate the risks accumulated by the financial sector, the report said. But the key lies in unwavering implementation. It is necessary to further slow down credit growth and improve the efficiency of credit distribution, it added.

State-owned enterprise reforms must be implemented to facilitate "zombie" enterprises' withdrawal from the market, the report said. China should promote consumption with fiscal policy and control excessive investment, especially at the local level, which helps achieve economic rebalancing and improve the quality of economic growth.

While implementing these reforms, policy frameworks should be further strengthened to give the People's Bank of China, the central bank, greater operational independence in the implementation of monetary and exchange rate policies and allow the market to play a more decisive role, the IMF suggested.

This year and next year, the Asia-Pacific region is expected to maintain strong economic growth, with the growth rate expected to reach 5.6 percent, which is about 0.1 percentage points higher than the previous forecast. This is due to strong global demand and a favorable financial environment, the IMF added.

However, the Asia-Pacific economies need to be prepared for turbulent times although the global and regional growth is strong, it warned, calling on the regional countries to continue reform efforts.

Editor: Mevlut Katik

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Keywords:   IMF,Asia Pacific,Economy,Growth