IMF: Reforms helping China's economy

The International Monetary Fund (IMF) has released a report that concludes the Chinese economy continues to perform strongly.

The 2018 Article IV Consultation with China report, released on Wednesday, shows that China's GDP growth accelerated to 6.9 percent in 2017, driven by a cyclical rebound in global trade.

Growth is projected to weaken slightly to 6.6 percent in 2018, owing to the lag effect of financial regulatory tightening and the softening of external demand. Headline inflation has remained contained at around 2 percent and is expected to rise gradually to 2.5 percent. 

"The Chinese economy is performing well, and reforms are making good progress, in particular in the financial sector. De-risking has advanced further. Credit growth slowed. Overcapacity reduction has progressed. Anti-pollution efforts intensified, and opening-up has continued," said James Daniel, assistant director of IMF's Asia and Pacific Department.

The report also acknowledged the multiple reforms that China has been undertaking.

"We welcome the government's increased focus on switching from high-speed to high-quality growth, in particular shifting from excessive debt finance investment. Consumption will sustain growth together with raising living standards, a cleaner environment and much reduced financial sector risks," said Daniel.

Daniel also noted that achieving high-quality growth would be greatly helped by accelerating reforms in many areas.

The first is to de-emphasize the growth target.

"Rebalancing the Chinese economy will likely mean somewhat slower overall growth. This should not be resisted," said Daniel.

The second is reining in credit growth.

"Credit growth has slowed in 2017, but it remains too fast. Slowing it further will require less public investment, tighter constraints on state-owned enterprises and curbing the rapid growth in household debt," said Daniel.

The third is to boost consumption.

"The Belt and Road initiative is welcome and potentially transformative. Its success will be enhanced by having an overarching framework, more focus on debt sustainability in participating countries and greater transparency," said Daniel.

Daniel noted that China's continuing opening-up is important to China and the world.

"I think it's critical to China, but China is also the driver of the world economy. So the rest of the world is also looking to China continuing its opening-up," said Daniel.

Ying Wang in Washington contributed to the story.