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July 25, 2017

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IMF revises up China’s growth view for 2017/18

THE International Monetary Fund yesterday revised up China’s growth forecast for 2017 and 2018 to 6.7 percent and 6.4 percent respectively, with the better China prospects expected to drive global expansion.

The updated World Economic Outlook report, which came days after China posted a stronger-than-expected second quarterly performance, was a reflection of a solid first quarter underpinned by previous policy easing and supply-side reforms, including efforts to reduce excess capacity in the industrial sector, the IMF said.

“China is quantitatively a big contributor to the overall world growth picture. More generally, strong Chinese growth drives particularly Asian region but also throughout the world,” said Maurice Obstfeld, chief economist of the IMF in an interview with Xinhua after the release of the updated report.

The revision of 2017 followed an April upgrade by the IMF on China’s gross domestic growth forecast to 6.6 percent and 6.2 percent for 2017 and 2018 respectively, 0.1 percentage point and 0.2 percentage point higher than its previous forecast.

China has set its full-year growth target for 2017 at “around 6.5 percent.” The 6.7-percent forecast will leave the world’s second-largest economy on par with its growth level in 2016.

The IMF also revised up China’s economic forecast for 2018 by 0.2 percentage point to 6.4 percent, citing hopes the country may keep high public investment and delay fiscal adjustment to meet its target of doubling the 2010 real GDP by 2020.

But the IMF also warned against strong credit growth that may come with rising downside risk to medium-term growth.

Obstfeld said the IMF recognizes China is going through a very important rebalancing process, which will inevitably entail slowing growth.

He said China’s recent moves to redress non-performing loans and a coordinated financial oversight overhaul are welcome.

“As I have said before — what happens in China doesn’t stay in China — the spillover to the global economy is very large ... And it’s very important for the world economy that China not just grows at a strong rate but that it grows in a stable fashion, dependable fashion without big fluctuation,” said Obstfeld.

While highlighting China’s action in reforming and improving its financial oversight such as the centralization of financial oversight, Obstfeld also noted the necessity for China to push forward structural reform on state-owned enterprises, suggesting that China needs to put SOEs on firm budgetary basis and think harder on the financial sector.

On the global perspective, the IMF said the pickup in global growth recovery remains on track, maintaining its previous forecast of global growth at 3.5 percent and 3.6 percent respectively for 2017 and 2018.

However, it revised down the growth forecast of the United States from 2.3 percent to 2.1 percent in 2017, and from 2.5 percent to 2.1 percent in 2018, primarily reflecting the assumption that fiscal policy will be less expansionary than previously anticipated.

Another country with lower growth forecast for 2017 is Britain with its weaker activity in the first quarter.

But the IMF growth projections of the economies of the eurozone, Japan and Canada were revised to stay at 2 percent.


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