The International Monetary Fund has raised China’s GDP projection to 8.4% for this year, a 10-year high, but its chief economist Geeta Gopinath cautioned that economic growth in the world’s second-largest economy was imbalanced and private consumption was as high. Has not risen as fast as was expected. After the coronavirus crisis.
The IMF urged China to address its high corporate debt levels, resulting in the implementation of easy monetary policy during the coronovirus epidemic.
In its latest issue of the World Economic Outlook released in Washington, the IMF placed China’s 2021 growth at 8.4%, up 0.3 percentage points from its January forecast.
Official media reported on Wednesday that its projection for China’s economic expansion for 2022 is unchanged at 5.6%.
The IMF forecast for China, although much higher than other major economies, including the US, Germany and France, is less than 12.5% growth rate for India in 2021. The 8.4% projection is above the 6% target set by the Chinese government. year.
China’s economy, which came first in the grip of the coronavirus epidemic and recovered from its effects, grew 2.3% in 2020, recording the lowest annual growth rate in 45 years.
According to data released by the National Bureau of Statistics of China (NBS), the gross domestic product (GDP) of the world’s second-largest economy grew 2.3% in 2020 to $ 15.42 trillion.
In local currency, GDP increased from the 100-trillion-yuan limit to 101.5986 trillion yuan.
“With strong global growth, you have more exports. The US rescue plan will also increase demand for Chinese goods, ”said Geeta Gopinath, IMF chief economist and director of research.
However, the growth of China saw something unbalanced.
“It is still very much dependent on public investment. And private consumption has not recovered as fast as we expected, ”Ms. Gopinath said South China Morning Post.
“To make it a sustainable recovery, we hope that fiscal measures and other support measures will work towards supporting the recovery from the private sector,” he said.
Sino-US tensions that have increased on many fronts, from international trade to intellectual property and cyber security, are also mentioned in the report.
“Domestic economic inequalities arising from the epidemic can also lead to new trade barriers… In the midst of already high levels of trade restrictions, such action adds inefficiencies and weighs on recovery. In addition, the risks of the protectionist trend surrounding the technology are emerging, ”the IMF report said.
The IMF has also advised China to pursue its high corporate debt levels, which have resulted from easy monetary policy put in place during the coronovirus epidemic.
“China, of course, has re-emerged from the crisis more rapidly than any other country. IMF financial consultant Tobias Adrian released the report, saying, “These measures were very quick and very effective.”
“But the measures that were implemented are due to [a] Leverage and further increase in weaknesses, ”he was quoted as saying Post.
China’s financial authorities, IMF financiers said, should move away from providing easy access to capital to rein in corporate debt risks.
According to the IMF report on global financial stability released on Tuesday, weaknesses in China were particularly “driven by at-risk corporate borrowers”.
China made it easier for businesses to borrow during the epidemic to protect them and the economy. Large and small companies took loans at a fast pace and loans went to many struggling firms.
The nation’s debt-to-GDP ratio peaked at 266.4% at the end of the third quarter in 2020, according to the Chinese Council of Social Sciences (CASS), a think tank associated with the State Council. It expects the ratio to hit 275% for the whole of 2020.
This has exacerbated the debt problem that existed before the epidemic. Post said.
Pre-Kovid, many Chinese firms received favorable prices on their bonds and loans due to implicit guarantees, as governments at various levels provided local borrowers with backstops to attract investors.
The report noted that companies that had two-year operating losses prior to the epidemic had a credit spread of more than two-thirds of the debt issued by them, which was relatively low-risk.
The report noted that the difference in yields between government and corporate debt was distorted not by the voice of the business but by implicit government guarantees.
A number of unexpected defaults from state-owned enterprises in the fourth quarter of 2020 have raised investor concerns about guarantees set for vulnerable borrowers. The report states that it may move faster in future default risks.
China’s Banking and Insurance Regulatory Commission (CBIRC) warned in July last year that potential financial risks remain high, urging advance caution for a possible spike in non-performing loans (NPLs).
In a release, the commission listed a number of obvious risks and challenges, including rising NPLs, asset quality deterioration in small and medium-sized financial institutions, and the resurgence of shadow banking.
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