IMF raises China growth forecast for 2017 to 6.8%
The International Monetary Fund raised its growth forecast for China but again warned of risks stemming from the build-up of debt. (Photo: AFP/Chandran Khanna)
BEIJING: The International Monetary Fund raised its growth forecast for China on Tuesday (Oct 10) but again warned of risks stemming from the build-up of debt in the world's second largest economy.The fund's latest World Economic Outlook gives President Xi Jinping a boost but also a warning as he prepares to accept a second five-year term as general secretary of the Communist Party at a major congress next week.The report also projects strengthening economic growth across most of Asia, raising its forecast for Japan but reducing it for India.The fund expects China's economy to expand by 6.8 per cent this year, up from its previous estimate of 6.7 per cent, due to stronger recorded growth in the first half.If realised, the growth rate will outdo last year's 6.7 per cent, which was China's slowest pace of expansion since 1990.For 2018 the IMF raised its estimate to 6.5 per cent from the 6.4 per cent forecast in its July World Economic Outlook.
In raising the growth targets, the fund said it expects authorities to maintain a high level of investment-fuelled growth "to meet their target of doubling real GDP between 2010 and 2020".The uptick in growth will result in greater debt levels over the long term, the IMF said in the report, raising the prospect of a "sharp growth slowdown in China".The fund urged authorities to intensify efforts to rein in the expansion of credit. Its latest World Economic Outlook predicts strengthening economic growth globally, building on healthy data from the first half of 2017.China's booming economy continues to propel Asia and drive worldwide economic growth.
But despite the rosier near-term outlook, the fund is concerned about growing debt in the country.China's slower transition from an investment-based economy to a consumption-based one, the report said, "comes at the cost of further large increases in debt".The pace of China's credit growth has alarmed analysts in recent years.Since the global financial crisis in 2008 its debt load as a percentage of gross domestic product has grown more than 10 per cent per year on average, according to IMF estimates, which assessed the ratio had ballooned to 234 per cent of GDP by 2016.Earlier this year ratings agencies Standard and Poor's and Moody's cut their sovereign rating on China, with both citing rapidly accumulating debt.Analysts will look for signals about China's future economic and financial policies during the week-long Communist Party congress which starts on Oct 18. The government will publish third-quarter growth data on Oct 19.Elsewhere in Asia, the fund raised Japan's growth forecast to 1.5 per cent this year from 1.0 per cent last year. But it was less optimistic on the country's long-term prospects, citing the shrinking Japanese labour force.In India, the "growth momentum slowed" due to the impact of a currency exchange initiative and the launch of a nationwide goods and services tax. The IMF lowered India's forecast growth to 6.7 per cent from the 7.2 per cent predicted in July.Strong global demand has also been a boon for the rest of Asia, where the fund forecasts sustained growth. "In the rest of emerging market and developing Asia," the fund wrote, "growth is expected to be vigorous".