{ "title": "Transcript of a Press Teleconference Call with International Monetary Fund Officials on China's 2009 Article IV Consultation", "publication": "IMF News, July 24, 2009", "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/28/04/54/tr072309", "canonical": "https://www.imf.org/en/news/articles/2015/09/28/04/54/tr072309", "overlayPath": "/en/news/articles/2015/09/28/04/54/tr072309/index.md", "summary": "Mission timing and locations visited:", "publishDate": "2009-07-24", "sections": [ { "heading": "Background and scope of the 2009 Article IV Consultation", "content": "- Mission timing and locations visited:\n - Mission went to China in late May, early June.\n - Visits included Anhui Province (Hefei), Shanghai, and Beijing.\n- Principal focus:\n - The main focus was on policies needed to catalyze private consumption and to reorient investments in China amid the global financial crisis.\n - Dialogue with authorities, financial institutions, and private sector participants was described as constructive and candid.\n- Institutional framing:\n - The consultation assessed both domestic policy needs and international spillovers, consistent with the Fund’s bilateral and multilateral surveillance mandate." }, { "heading": "Exchange rate assessment and labeling", "content": "- Operational guidance and labels:\n - The original operational guidance from the 2007 surveillance decision included exchange rate labels (e.g., “fundamental misalignment”).\n - That guidance was revised in June because the use of labels was judged to impede effective implementation and candid surveillance assessments.\n - As a result, labels were not used in the China consultation.\n- Staff and Board views on valuation:\n - The staff report assessed the exchange rate as “substantially undervalued.”\n - Board discussion showed differences of view: some directors described the exchange rate as substantially undervalued; others saw a lesser role for the exchange rate in rebalancing.\n- Role of exchange rate in rebalancing:\n - A stronger RMB was judged to help by:\n - Reducing the price of tradable goods and increasing labor income (boosting consumption).\n - Providing incentives for greater investment in domestically-oriented sectors.\n - The exchange rate was one important policy among many; reliance on any single policy would be insufficient." }, { "heading": "Quantitative note on past exchange rate movement", "content": "- Since 2005, the mission noted “around a 20 percent increase in the real exchange rate” in effective terms." }, { "heading": "Monetary policy, interest rates, and cost of capital", "content": "- Structural cost of capital:\n - Staff saw a need for a structural increase in the cost of capital because capital was judged to be cheap, incentivizing highly capital-intensive investment, particularly in tradable sectors.\n - Recommended gradual phasing out of the ceiling on deposit rates to raise the cost of capital.\n- Current monetary stance (as of the consultation):\n - The loosening of monetary policy since late last year and through this year was judged appropriate and well calibrated to circumstances.\n - Risks from monetary expansion were recognized, notably related to credit quality given a very large increase in credit growth.\n- Policy sequencing:\n - Once the economic recovery is more firmly established, the staff favored withdrawing monetary stimulus prior to fiscal stimulus.\n - There was perceived scope for “perhaps even a little bit more fiscal policy stimulus this year, the remainder of this year and next,” while monetary stimulus is steadily withdrawn.\n- Deposit-rate liberalization:\n - Authorities have moved toward market determination of rates in the interbank and corporate bond markets.\n - Remaining issue: liberalizing deposit and lending rate ceilings, with attention to timing and preconditions (strong supervisory framework, alternative monetary-policy tools) to mitigate financial-stability risks." }, { "heading": "Fiscal stimulus and rebalancing toward consumption", "content": "- Existing stimulus:\n - A substantial stimulus package announced in the fall of last year was framed across two and a half years through the end of 2010.\n - A large part of the stimulus has come through infrastructure spending; expanded health care spending and some pension expansion are also in the pipeline.\n- Staff recommendations on fiscal stance:\n - There was “probably some scope for maintaining that stimulus next year in terms of maintaining a fiscal deficit of about the same order this year as next year.”\n - Preference to reorient some fiscal stimulus away from infrastructure and toward measures that directly boost private consumption (consumption subsidies, reductions in some consumption taxes).\n - Any additional stimulus envisioned was marginal relative to last year’s package, possibly coming from an additional deficit or reorientation within existing plans." }, { "heading": "Labor markets, reallocation, and regional dynamics", "content": "- Labor-market absorption:\n - Official data and anecdotal evidence suggested labor markets have been “absorbing workers laid off from export industries,” with reallocation occurring geographically and across sectors.\n - Observed dynamics:\n - Some migrant labor returned to export sectors with possible reductions in real wages.\n - Interior provinces and rural areas have been experiencing stronger growth relative to historical patterns, absorbing labor.\n - Fiscal stimulus (infrastructure spending) has absorbed labor in inland areas.\n - Caveats:\n - Data coverage issues (especially for migrant workers) complicate precise measurement; assessment uses a mix of official statistics and mission field observations.\n - Outstanding concerns remain for specific groups (e.g., college graduates)." }, { "heading": "Spillovers and multilateral context", "content": "- Near-term spillovers:\n - Because current growth was driven largely by public spending with relatively low import content, near-term regional spillovers were assessed as more limited, except to commodity producers (e.g., Australia) where infrastructure is commodity-intensive.\n- Long-run spillovers and global rebalancing:\n - The policies advocated (boosting private consumption, social sector improvements, increasing cost of capital, capital-market development, exchange-rate adjustment) were judged to reduce global current account imbalances and have positive global effects.\n - The Fund positioned these policies as consistent with China’s domestic interest and beneficial for the global economy." }, { "heading": "Data quality and the Fund’s information use", "content": "- Data scrutiny:\n - The Fund does not collect primary statistics but triangulates China’s official data with other available data (regional comparators, Hong Kong; Taiwan Province of China; Japan).\n - Fund staff judged China’s official statistics broadly consistent with other information, acknowledging some statistical issues but not ones that materially changed the overall view.\n- Technical assistance:\n - The IMF provides considerable technical assistance to China on statistical issues." }, { "heading": "Article IV timing, publication, and related procedural issues", "content": "- Delays in consultations:\n - The Article IV consultation had been delayed in prior years; reasons included implementation issues related to the 2007 surveillance decision on exchange-rate labeling and disruptions from the global financial crisis (e.g., September problems with Lehman Brothers).\n - The Board meeting was not blocked or vetoed by Chinese authorities; the delays were related to internal discussions on guidance and other intervening factors.\n - Other members’ consultations were also delayed for similar reasons.\n- Publication of staff report:\n - A staff report was presented to the Executive Board.\n - Publication of the staff report is subject to the decision of the Chinese authorities, who were considering whether to publish; there was no specified timeframe for that decision.\n\nTranscript of a Press Teleconference Call with International Monetary Fund Officials on China's 2009 Article IV Consultation, July 24, 2009.\n\n---\n\n\n References\n\n- People's Republic of China and the IMF\n- IMF Policy Advice -- A Factsheet\n- Transcripts\n- PRESS CENTER\n- IMF Executive Board Concludes 2009 Article IV Consultation with the People's Republic of China\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/28/04/54/tr072309" } ], "bullets": [ "[Markdown version](/en/news/articles/2015/09/28/04/54/tr072309/index.md)", "[Structured JSON version](/en/news/articles/2015/09/28/04/54/tr072309/index.json)", "[Bundle manifest](/en/news/articles/2015/09/28/04/54/tr072309/bundle-manifest.json)", "Published: July 24, 2009", "Mission timing and locations visited:", "Principal focus:", "Institutional framing:", "Operational guidance and labels:", "Staff and Board views on valuation:", "Role of exchange rate in rebalancing:", "Since 2005, the mission noted “around a 20 percent increase in the real exchange rate” in effective terms.", "Structural cost of capital:", "Current monetary stance (as of the consultation):", "Policy sequencing:", "Deposit-rate liberalization:", "Existing stimulus:", "Staff recommendations on fiscal stance:", "Labor-market absorption:", "Near-term spillovers:", "Long-run spillovers and global rebalancing:", "Data scrutiny:", "Technical assistance:", "Delays in consultations:", "Publication of staff report:", "[People's Republic of China and the IMF](http://www.imf.org/external/country/CHN/index.htm)", "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)", "[Transcripts](https://www.imf.org/en/news/searchnews)", "[PRESS CENTER](http://presscenter.imf.org/)", "[IMF Executive Board Concludes 2009 Article IV Consultation with the People's Republic of China](https://www.imf.org/external/np/sec/pn/2009/pn0987.htm)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2015/09/28/04/54/tr072309/index.md", "json": "/en/news/articles/2015/09/28/04/54/tr072309/index.json", "bundleManifest": "/en/news/articles/2015/09/28/04/54/tr072309/bundle-manifest.json" }, "generatedAtUtc": "2026-09-27T12:50:43.689Z" }