Chinese Economy to Grow Faster Amid Debt Risks -IMF

  • Chinese Economy to Grow Faster Amid Debt Risks -IMF

The International Monetary Fund on Tuesday said the China’s average annual growth rate would increase through 2020, but warned it would come at the cost of rising national debt that increases medium-term risks to growth.

According to the IMF, the world’s second largest economy will expand at an average rate of 6.4 percent annually from 2017 through 2020, up from 6 percent forecast by the Fund a year ago.

The Fund, however, expect household, corporate and government debt to increase to 300 percent of the gross domestic product by 2022, up from 242 percent projected last year.

Chinese policymakers have started addressing excessive borrowing at state enterprises and have said their indebtedness remains a priority.

“Given strong growth momentum, now is the time to intensify these deleveraging efforts,” the IMF said. “Reform progress needs to accelerate to secure medium-term stability and address the risk that the current trajectory of the economy could eventually lead to a sharp adjustment.”

Private sector borrowing rose by 16 percent in 2016, and has risen by 80 percentage points to about 175 percent of output in the last 9 years.

IMF estimated that a healthier credit growth would have kept real GDP at 5.5 percent from 2012 to 2016, instead of the 7.25 percent.

Growth is expected to remain unchanged 6.7 percent this year as last year momentum is expected to continue to sustain the economy. Also, the inflation rate is seen unchanged at 2 percent in 2017, same as projected a year ago.

About the Author

Samed Olukoya
CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade long experience in the global financial market. Contact Samed on Twitter: @sameolukoya; Email: [email protected]

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