The latest annual assessment of China’s economy by the International Monetary Fund (IMF) sees growth remaining robust across the near-to-medium-term, while cautioning that credit expansion is still too rapid.
The IMF’s 2018 Article IV Consultation for China highlights the country’s shift from high-speed growth towards high-quality growth, and the need to further drive the reform agenda amidst current strong growth in order to “fix the roof while the sun is shining.”
According to the report China could overtake the US to become the world’s largest economy by 2030 with annual GDP of around USD$25 trillion, even in the event of a marked slowdown in growth.
“The country now accounts for one-third of global growth,” said the IMF in a press release. “Over 800 million people have been lifted out of poverty and the country has achieved upper middle-income status.
“China’s per capita GDP continues to converge to that of the United States, albeit at a more moderate pace in the last few years.”
The report nonetheless points out that China still needs to rebalance its economy, expand the role of the market, drive further economic opening, updates its policy framework, as well as curb credit expansion, which remains too rapid in spite of a marked easing of growth.
“Despite the sharp rebound in nominal GDP and industrial profits, total non-financial sector debt still rose significantly faster than nominal GDP growth in 2017.
“While the corporate debt to GDP ratio has stabilised, government and especially household debt is rising, driven by continued strong off-budget investment spending and a rapid increase in mortgage and consumer loans.
“It may take determined actions over an extended period of time to address underlying vulnerabilities.”
The IMF also called for accelerated rebalancing via increases in health, education and social transfers, to be funded by taxes on income, property and carbon emissions.
According to the IMF this increase in social spending would serve to boost consumption, as well as ameliorate income quality and combat pollution.