{
  "title": "IMF Survey : China’s Transition to Slower But Better Growth",
  "publication": "IMF News, August 14, 2015",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/28/04/53/socar081415b",
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  "summary": "China is moving to a “new normal,” of slower yet safer and more sustainable growth. This involves giving the market a more decisive role in the economy, says the IMF in its annual assessment of the economy.",
  "publishDate": "2015-08-14",
  "sections": [
    {
      "heading": "Economic health check — growth and vulnerabilities",
      "content": "- China’s growth is expected to be 6.8 percent in 2015, down from 7.4 percent last year.\n- The slowdown is in line with the government’s target of around 7 percent and reflects progress in addressing vulnerabilities, especially a needed moderation in real estate investment.\n- The recent stock market correction will not derail the ongoing adjustment to a slower yet more balanced growth path.\n- Key vulnerabilities identified: fiscal, real estate, financial, and corporate sectors.\n- Progress noted:\n  - Credit growth has slowed significantly over the past few years.\n  - Shadow banking (borrowing from nonbank financial entities) has been reined in.\n  - Investment is cooling, led by a reduction in residential real estate growth.\n  - A new budget law was passed to address off-budget borrowing.\n- Remaining needs:\n  - Further progress to put vulnerabilities on a downward path, including a decline in the level of residential real estate investment.\n  - Multiyear deleveraging to help close the credit gap.\n  - Medium-term fiscal consolidation."
    },
    {
      "heading": "Managing the slowdown — policy calibration and targets",
      "content": "- Growth calibration targets recommended:\n  - Achieve growth of 6½-7 percent this year.\n  - Achieve growth of 6-6½ percent next year.\n- Monetary policy recommendation:\n  - With growth on track in the targeted range and a benign inflation outlook, monetary policy should take a wait-and-see approach.\n  - Significant easing risks exacerbating credit and investment vulnerabilities.\n- Fiscal policy recommendation:\n  - Fiscal policy should remain accommodative given headwinds from slowing credit and real estate investment.\n  - Fiscal policy should consolidate gradually from next year to put public finances on a sustainable path.\n- Policy trade-off highlighted:\n  - “Going too slow will lead to a continued rise in vulnerabilities, while going too fast risks a disorderly adjustment.”\n  - Structural reforms are the key to managing the trade-off and boosting potential growth."
    },
    {
      "heading": "Structural reforms — financial sector and state-owned enterprises",
      "content": "- Broad reform direction: move to a more open and market-based economy with a more decisive role for market forces.\n- Exchange rate policy:\n  - IMF recommends China can, and should, aim for an effectively floating exchange rate regime within 2–3 years.\n  - The new mechanism for determining the central parity of the Renminbi is a welcome step to allow market forces greater role.\n- Financial sector reforms:\n  - Advances include introduction of deposit insurance and progress in liberalizing interest rates.\n  - Moving to a market-based financial system requires banks to set deposit rates, lending rates, and loan policies based on market and commercial conditions to ensure access to finance for future-growth companies.\n- State-owned enterprise (SOE) reforms:\n  - Deepen reforms to level the playing field between private and public enterprises to allow private sector growth and job creation.\n  - Additional SOE reforms: increase dividend payments, strengthen governance, and allow exit of unviable state-owned enterprises."
    },
    {
      "heading": "Strategic assessment and conclusion",
      "content": "- Since the global financial crisis, China relied on an unsustainable growth model of excessive credit and investment; the leadership has set a comprehensive reform agenda and made considerable progress in reducing vulnerabilities.\n- The IMF urges acceptance of lower short-term growth to secure sustainable and stable long-term growth—a trade-off judged to be in China’s best interest.\n- “China is now the world’s largest economy on a purchasing power basis,” and continued implementation of necessary reforms will determine future success.\n- “The faster the progress, the sooner the growth-enhancing benefits will materialize.”\n\nSource: IMF Survey, August 14, 2015.\n\n---\n\n Content in this bundle\n\n- Cr15234pdf (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- https://www.imf.org/en/News/country-focus\n- PRESS CENTER\n- IMF Country Focus\n- Press release\n- SDR basket review\n- Global outlook\n- External imbalances\n- China and IMF\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/28/04/53/socar081415b"
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    "Published: August 14, 2015",
    "China’s growth is expected to be 6.8 percent in 2015, down from 7.4 percent last year.",
    "The slowdown is in line with the government’s target of around 7 percent and reflects progress in addressing vulnerabilities, especially a needed moderation in real estate investment.",
    "The recent stock market correction will not derail the ongoing adjustment to a slower yet more balanced growth path.",
    "Key vulnerabilities identified: fiscal, real estate, financial, and corporate sectors.",
    "Progress noted:",
    "Remaining needs:",
    "Growth calibration targets recommended:",
    "Monetary policy recommendation:",
    "Fiscal policy recommendation:",
    "Policy trade-off highlighted:",
    "Broad reform direction: move to a more open and market-based economy with a more decisive role for market forces.",
    "Exchange rate policy:",
    "Financial sector reforms:",
    "State-owned enterprise (SOE) reforms:",
    "Since the global financial crisis, China relied on an unsustainable growth model of excessive credit and investment; the leadership has set a comprehensive reform agenda and made considerable progress in reducing vulnerabilities.",
    "The IMF urges acceptance of lower short-term growth to secure sustainable and stable long-term growth—a trade-off judged to be in China’s best interest.",
    "“China is now the world’s largest economy on a purchasing power basis,” and continued implementation of necessary reforms will determine future success.",
    "“The faster the progress, the sooner the growth-enhancing benefits will materialize.”",
    "[Cr15234pdf (PDF)](/-/media/websites/imf/imported/external/pubs/ft/scr/2015/_cr15234pdf.pdf){rel=\"external\" type=\"application/pdf\"}",
    "[https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[IMF Country Focus](https://www.imf.org/en/news/country-focus)",
    "[Press release](http://www.imf.org/external/np/sec/pr/2015/pr15380.htm)",
    "[SDR basket review](http://www.imf.org/external/pubs/ft/survey/so/2015/POL080415A.htm)",
    "[Global outlook](http://www.imf.org/external/pubs/ft/survey/so/2015/NEW070915A.htm)",
    "[External imbalances](http://www.imf.org/external/pubs/ft/survey/so/2015/POL072815A.htm)",
    "[China and IMF](http://www.imf.org/external/country/chn/index.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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