The International Monetary Fund said China’s slowing economy faces significant downside risks and relies too much on investment, urging leaders to boost consumption and channel citizens’ savings away from housing.
Achieving a so-called “soft landing” is a key challenge, directors of the IMF executive board said in a statement released today. “China is well placed to respond forcefully, if needed, to a deterioration of the external environment, in particular through fiscal policy,” the IMF said. It repeated an assessment that the yuan is “moderately” undervalued, which China disputed.
The IMF’s assessment highlights the tension between China’s efforts to stem a six-quarter slowdown in economic growth and limiting threats to longer-term expansion by tilting more toward consumption. Leaders have cut interest rates and stepped up investment as the ruling Communist Party prepares for a once-a- decade leadership handover starting later this year.