IMF Raises China 2017 GDP Forecast

The International Monetary Fund on Wednesday raised its forecast for China’s economic growth this year to 6.7%, citing “policy support, especially expansionary credit and public investment”. The forecast was an increase from its already-raised April forecast of 6.6%.

China’s economy grew a faster-than-expected 6.9% in the first quarter, well above the government’s target of around 6.5% for the full year. The IMF said it now expects China’s growth to average 6.4% from 2018-2020. In April, the fund said it expected 2018 growth to be 6.2%, Reuters reported.

Despite the improved growth forecast, the IMF recommended China speed up reforms to transition its economy to more sustainable growth and adopt less accommodative monetary policy. “The critically important recent focus on tackling financial sector risks should continue, even if it entails some financial tensions and slower growth,” the IMF said in a release.

China should also resume progress towards a flexible exchange rate, the IMF said, while adding that it assesses the yuan currency to be “broadly in line with fundamentals”.

“China continues to transition to a more sustainable growth path and reforms have advanced across a wide domain,” said First Deputy Managing Director of the International Monetary Fund David Lipton in Beijing. “We are confident that China will once again find its way through the challenges ahead,” ECNS reported.

He said China has the potential to safely sustain strong growth over the medium term.

His comment came after the IMF staff members visited Beijing and Lanzhou from June 1 to 14 to conduct discussions on the annual Article IV review of the Chinese economy.

Official data released by the National Statistics Bureau on Wednesday shows industrial output and retail sales grew at a steady pace in May.

He said the efforts made by governments in the past two months to regulate debt level can be described as important and special. He said debt control measures will have some effects on credit growth in the future, but the key suggestion for China is to regulate allocation of credit, to make sure credits go to regions where they are mostly in need.

Commenting on the impact of future possible interest hikes in the United States, he said both China and other nations in Asia need to take into account capital flows and trade data when making monetary policies, but there is no need to overreact to the normalization of US economy.