IMF raises China 2017 growth forecast due to its progress in economic reform

NEW YORK, Oct.12 — The International Monetary Fund (IMF)’s move
to raise its forecast for China’s economic growth to 6.8 percent reflects
the country’s recent progress in trimming financial risks and deepening
economic reform, U.S. experts have said.

In its latest World Economic Outlook released Tuesday, the IMF expected the
Chinese economy to grow 6.8 percent this year and 6.5 percent next year,
both 0.1 percentage point higher than its previous forecast in July. “The
growth rate is wonderful compared to the growth of many other countries,”
Farok Contractor, a distinguished professor at Rutgers Business School,
told Xinhua on Tuesday. “Off course it has come down from the previous
eight or ten percent, but that is still a very healthy growth rate and that
should be the envy of any other country in the world,” he said. According
to IMF, the upward revision to the 2017 forecast reflects “the
stronger-than-expected outturn in the first half of the year underpinned by
previous policy easing and supply-side reforms.” “There have been a lot of
achievements in economic management in China…I would say that the 6
percent path the China is on will be sustained for quite some time now,”
Contractor noted.

In the past few years, China has been intensifying its efforts to trim
financial risks and shift the economy from large-scale stimulus towards
consumption, services and innovation. Analysts said such structural
reforms could help the country to maintain a more sustainable economic
growth in the long run. Paul Sheard, executive vice president and chief
economist of S&P Global, told Xinhua in a recent interview that China’s
credit-fueled infrastructure and residential housing investment in the past
decade led to a build-up of debt and credit in the economy, which is why
economic reforms are critical. China has adopted a range of measures to
manage debt risks and push forward reform in recent years, including
introducing a new high-level committee on financial stability and
development in July.

Stephen Roach, a senior fellow at Yale University and former chairman of
Morgan Stanley Asia, lauded Chinese government’s determination to reduce
financial risks. “China’s central bank, the China Banking Regulatory
Commission, and the State Council have all taken explicit actions in 2017
to reduce the expansion of debt — especially the mounting indebtedness of
state-owned enterprises,” said Roach in a recent interview with Xinhua.
“These efforts now seem to be having a positive impact…As long as China
continues to emphasize financial stability – and takes actions aimed at
promoting it – the threat to growth and development should not be serious,”
the expert added. Sheard said it’s important that institutional and
market-enhancing reforms that create the right incentives for capital to be
allocated efficiently continue to be implemented. He points out that
reforms should also continue for the necessary rebalancing of the economy
from excessive reliance on investment to household consumption becoming the
key driver of economic growth and rising living standards.

China’s economy expanded 6.9 percent in the first half of 2017, with
consumption and services, and new innovation-driven economic sectors taking
up larger roles, according to data from the National Bureau of Statistics.
“In the last five or ten years, more than one-fourth of the world’s
economic growth has come from China alone, and that’s a big stabilizing
factor,” said Contractor. In face of the trend of de-globalization in
western countries, the professor expected China to play a more crucial role
in global economic development.”Unfortunately we’re in an era where in the
countries like the United States and Europe, there is a lot of
introspection, inward looking, angst (towards globalization),” Contractor
said. “To maintain the path of progress for humanity economically and
socially requires a country like China to take the leadership position in
setting the rules,” said the expert, who has been visited China for many
times. In terms of international business, “whether it is exports or
foreign direct investment, you also need leadership. While the west is in a
state of self-questioning, China can play a role,” he said. – XINHUA