## IMF Staff Completes 2017 Article IV Mission to China _IMF News, June 14, 2017_ ## Source details **Canonical URL:** [IMF Staff Completes 2017 Article IV Mission to China](https://www.imf.org/en/news/articles/2017/06/07/pr17219-china-imf-staff-completes-2017-article-iv-mission) ## Other formats - [Markdown version](/en/news/articles/2017/06/07/pr17219-china-imf-staff-completes-2017-article-iv-mission/index.md) - [Structured JSON version](/en/news/articles/2017/06/07/pr17219-china-imf-staff-completes-2017-article-iv-mission/index.json) - [Bundle manifest](/en/news/articles/2017/06/07/pr17219-china-imf-staff-completes-2017-article-iv-mission/bundle-manifest.json) ## Bibliographic details - Published: June 14, 2017 --- ### Mission overview and context - Press Release date: June 14, 2017 - Mission period: June 1 to 14 - Mission led by: James Daniel, Assistant Director of the Asia and Pacific Department - Final policy discussions joined by: David Lipton, IMF First Deputy Managing Director - Meetings included senior officials: Vice Premier Ma Kai; People’s Bank of China Governor Zhou Xiaochuan; Director of Central Economic and Financial Reform Leading Group Liu He; Finance Minister Xiao Jie; China Banking Regulatory Commission Chairman Guo Shuqing; China Securities Regulatory Commission Chairman Liu Shiyu - Statement type: End-of-Mission press release conveying preliminary IMF staff findings; staff report to be prepared for the IMF’s Executive Board subject to management approval ### Growth projections and risk assessment - Staff project GDP to expand by 6.7 percent in 2017. - Staff project GDP to expand by 6.4 percent annually on average between 2018-20. - Key assessment: China continues to transition to a more sustainable growth path, but reform progress needs to accelerate to secure medium-term stability and to address the risk that the current trajectory could eventually lead to a sharp adjustment. - Near-term risks: Some near-term risks have receded, but medium-term vulnerabilities remain. ### Progress noted by IMF staff - Policy support (expansionary credit and public investment) has helped maintain strong growth. - Corporate debt growth is slowing, reflecting restructuring initiatives and overcapacity reduction. - The house price boom is being gradually contained and excess inventory reduced. - Local government borrowing frameworks are being improved and a blueprint for reforming central-local fiscal relations has been published. - The creation of new businesses has tripled since the 2014 reform. - Data weaknesses have been recognized and actions taken to improve integrity. ### Core policy recommendations (high level) - Switch faster from investment to consumption. - Increase the role of market forces. - Implement a more sustainable macro policies mix. - Continue regulatory tightening to address financial sector risks. - Tackle nonfinancial sector debt. - Further improve policy frameworks and data coverage. ### Specific recommended actions - Boost consumption: - Increase public spending on health, pensions, education, and transfers to poor households to reduce excessive precautionary savings. - Make the tax system more progressive and greener to boost growth while reducing high income inequality and pollution. - Increase market forces and SOE reform: - Accelerate and broaden the existing reform agenda for state-owned enterprises (SOE), including phasing out implicit support and increasing tolerance for default and exit. - Remove barriers to entry, especially in the highly closed service sector. - Set more ambitious targets to reduce overcapacity in coal and steel sectors and other sectors, with greater reliance on market forces. - Macro-policy mix and debt reduction: - Focus more on the quality and sustainability of growth and less on quantitative targets. - Pursue gradual fiscal consolidation. - Adopt less accommodative monetary policy. - Increase recognition of losses, especially for underperforming SOEs and zombie enterprises. - Reduce the flow of new debt by cutting off-budget public investment and imposing hard budget constraints on SOEs. - Financial sector policy: - Continue the recent focus on tackling financial sector risks, even if this entails some financial tensions and slower growth. - IMF will provide more detailed analysis and recommendations in the five-yearly Financial Sector Assessment Program (FSAP) review, expected to be completed by the end of the year. - Monetary policy framework and capital account: - Phase out monetary targets over the medium term. - Resume progress towards a flexible exchange rate. - Improve communications. - Apply capital flow measures transparently and consistently. - Sequence further capital account liberalization with supporting reforms, including an effective monetary policy framework, a sound financial system, and exchange rate flexibility. - Central-local fiscal relations: - Centralize some expenditure responsibilities, such as social insurance. - Give local governments more revenue-raising authority and sufficient debt quotas to reduce reliance on off-budget borrowing and land sales. - Data and transparency: - Address remaining data gaps to further improve policy making and meet G20 commitments. ### Concluding assessment - IMF staff express confidence that, given China’s record of successful reforms and the authorities’ commitment, China can find its way through the challenges ahead. - Staff appreciation expressed for the hospitality and productive discussions with Chinese authorities during the mission. *IMF Staff Completes 2017 Article IV Mission to China — Press Release No. 17/219, June 14, 2017* --- ## References - [David Lipton](http://www.imf.org/external/np/omd/bios/dl.htm) - [Modernizing China: Investing in Soft Infrastructure](https://www.bookstore.imf.org/books/title/modernizing-china) - [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) - [Press Releases](https://www.imf.org/en/news/searchnews) - [PRESS CENTER](http://presscenter.imf.org/) - [https://www.imf.org/en/home](https://www.imf.org/en/home) _Source: https://www.imf.org/en/news/articles/2017/06/07/pr17219-china-imf-staff-completes-2017-article-iv-mission_