By Wang Shen
The International Monetary Fund (IMF) staff completed the 2018 Article IV review of China and held a press conference in Beijing on May 30, as reported by the Yicai Media Group on Wednesday.
The IMF stated that China’s economic growth had accelerated in 2017 and is expected to slightly decrease in 2018 to 6.6 percent, and will moderate gradually to about 5.5 percent by 2023.
David Lipton, the IMF’s first deputy managing director, stated that the IMF encourages Chinese authorities to decisively shift the policy focus from a high-speed to a high-quality growth strategy. This will increase the benefits of the economic growth of the Chinese people and make this growth more sustainable.
Improving the quality of the economic growth will inevitably slow down the country’s growth rate, which is normal and controllable.
Meanwhile, the IMF stated that China should accelerate its process of reforms in many fields to achieve the goals for high-quality growth. These fields include: de-emphasizing growth targets, continuing to rein in credit growth, further boosting consumptions, allowing the market to forge a more decisive role, accelerating China’s opening-up to the rest of the world and modernizing its policy frameworks.
The way to further slowing down the credit growth is to reduce public investments, restrict the borrowing of state-owned enterprises and control the rapid growth of household debt.
The IMF also believed that the People’s Bank of China should maintain the stability of liquidity and continue to lower the reserve requirement ratio and apply open market operations.
As for the recent cases of debt defaults, James Daniel, assistant director of the Asia and Pacific Department, said that a certain degree of debt defaults shows that the market is healthy. China has a low default rate. But as the third largest bond market in the world, it is abnormal for China to have a very low or zero default rate.
Daniel also stated that he did not mean that the IMF welcomed defaults. But if the bond default rate is zero, all investments will have the same level of risk so that investors cannot form a better portfolio. Defaults do contain risks, but the IMF believed that the risks are controllable.
