IMF Holds China GDP Forecast

By Glenn Dyer | More Articles by Glenn Dyer

The International Monetary Fund (IMF) has maintained its 2018 forecast for China’s economic growth at 6.6% in its latest assessment of the world’s second biggest economy.

The IMF in January raised its forecast for China’s economic growth this year to 6.6% from 6.5%. That is the Chinese government’s forecast for 2018.

First quarter GDP rose at an annual 6.8%, the government’s Statistics Bureau said in April, slightly slower than the 6.9% seen in 2017.

The IMF said in its forecast, released in Beijing yesterday afternoon that GDP will slow to around 5.5% annual by 2023.(

IMF first deputy managing director David Lipton welcomed a shift in “policy focus from high-speed to high-quality growth”.

“Achieving this goal would be greatly helped by accelerating reforms in many areas, including de-emphasizing growth target, further reining in credit growth, boosting consumption, allowing market forces a more decisive role, deepening opening up and modernizing policy frameworks,” the IMF said.

Debt remains the biggest concern with China urged to further rein in credit growth by the Fund.

The Chinese government is in the third year of a regulatory crackdown on riskier lending practices, which has slowly pushed up borrowing costs and is pinching off alternative, murkier funding sources for companies such as shadow banking.

“There hasn’t been any deleveraging in the real economy. Let’s be clear of that. What has happened is the rate of increase of debt has slowed quite significantly,” according to James Daniel, Mission Chief for China and Assistant Director of the Asia & Pacific Department at the IMF.

He told reporters that even as China cracks down on the country’s credit risks, there has only been a modest rise in defaults.

“Now of course there’s a risk that you go from very few defaults to quite a lot. And for a market and for investors that are not used to that, that can be pretty destabilizing,” he said. “We do not see this. We see some uptick, very much contained and appropriate,” according to Reuters.

But it is only “natural” and “healthy” were there to be more defaults in China, because they are the best way to incentivise the market and allocate China’s savings more efficiently, he added.

But there remains a big imponderable in all of this – the on, off and now back on trade tussle between the Trump Presidency and China.

IMF China representative Alfred Schipke said at the review launch, “We are looking at rising protectionism as a downside risk…In our view, unilateral actions can be counterproductive.”

The Trump’s administration on Tuesday said it would proceed with tariffs on $US50 billion in Chinese imports as well as broader investment restrictions.

The announcement on Tuesday restated comments by Trump administration officials that both the tariffs and the restrictions remained in place even after the US and China sketched out a deal this month to reduce China’s $US375 billion trade surplus with America.

That brought a strong response from Chinese state-run media on Wednesday. Chinese state media said Beijing is ready to fight back if Washington is looking to reignite a trade war.

China commerce’s ministry reacted strongly, saying it was surprised by the latest US announcement and saw it as contrary to the consensus both sides have reached recently.

State news agency Xinhua said China hoped that the United States would not act impulsively but stood ready to fight to protect its own interests. "China’s attitude, as always, is: we do not want to fight, but we are also not afraid to fight," it said in the commentary by Xinhua reporter Yu Jiaxin.

And the Chinese tabloid the Global Times said the United States was suffering from a “delusion” and warned that the “trade renege could leave Washington dancing with itself”.

Reuters pointed out that the widely read Global Times is run by the ruling Communist Party’s official People’s Daily, although its stance does not necessarily reflect Chinese government policy.

"The Chinese government will have the necessary measures in place to deal with a US withdrawal from any settled agreement. If the US wants to play games, then China would be more than willing to play along and do so until the very end,” the paper said.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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