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The International Monetary Fund has again revised up China’s growth forecast for 2017, saying policy support has helped to maintain strong growth in the world’s second largest economy.
In its annual review of the country published on Wednesday, the IMF predicted China’s economy to grow 6.7 percent this year, up from 6.6 percent estimate in April’s World Economic Outlook and from 6.5 percent in January.
For 2018 to 2020, the Washington-based lender expects an annual growth of 6.4 percent.
China’s economy grew 6.7 percent in 2016, down from 6.9 percent in the previous year and the slowest pace in 26 years.
The IMF said policy support, especially expansionary credit and public investment, has since helped China to maintain strong growth. But it urged Beijing to speed up economic reforms and cut reliance on credit-fuelled growth to avoid bigger problems down the road.
“As has been widely recognised, including in the government’s reform plans, this requires deep reforms to transition from the current growth model that relies on credit-fed investment and debt,” IMF First Deputy Managing Director David Lipton said in the report, known as Article IV Consultation.
“It is critical to start now while growth is strong and buffers sufficient to ease the transition.”
The IMF said Chinese authorities had managed to reduce near-term risks, with corporate debt now growing more slowly, house price boom being gradually contained and the creation of new businesses tripling since 2014 reform, among other welcome signs.
But it said China should use the opportunity now to switch faster from investments to consumption-led growth by increasing public spending on health, pensions, education and support to the poor.
Among other recommended measures, Beijing should also increase the role of market forces by opening the closed sectors – such as services – to competition and increasing tolerance for default and exit for state-owned enterprises, the IMF said.
(GBTIMES)
