The International Monetary Fund decreased its forecast for growth in China this year to 8.25 percent of gross domestic product estimated at 9 percent in September, citing weaker exports and uncertain economic environment.
The pace of economic growth in China, which last year was 9.2%, can be slowed dramatically if the eurozone entered a severe recession. Despite the expected slowdown “China is capable of balancing financial response and should use it to provide more incentives for the domestic economy”, the IMF.
From there, however, added that they expect the second largest economy in the world next year to gain momentum and grow by 8.75 percent. But the IMF warned that unlike the anti-crisis stimulus in 2008 amounting to 4 trillion yuan, which led to embarrassing credit boom, China should offer fresh incentives rather through the national budget rather than through the banking system.
Inflation reached its peak and slows down to “a level of comfort” that would allow authorities to fine-tune monetary conditions and ensure the economy “moderate additional” loan, say from the international financial institution. The Chinese central bank should ease over the next few months the situation with liquidity through weekly open market operations, explained there, adding that if the capital injection remain sluggish, it could choose to further decrease their demand for the rate of bank reserves.
In December, the first three years of China’s central bank lowered its requirements for bank reserves by 0.5 percentage points. According to IMF, increasing pressure on the Chinese currency has weakened recently, the speed of accumulation of foreign reserves has also shrunk because of delayed trade surplus and greater reluctance to risk worldwide.
“But given that the current account still has a large surplus of U.S. dollars and foreign direct investment remained high, the pace of reserve accumulation should continue this year”, according to the international financial institution.
From appreciate the efforts of China to cool the property sector – a key driver of growth – as effective as and price growth has slowed and the volume of transactions has declined.