IMF chief: China in right direction to deal with crisis

(Xinhua)
Updated: 2009-11-13 19:25

SINGAPORE: China is taking the right direction to deal with the financial crisis and to retool its economic growth by putting the emphasis on domestic consumption, the International Monetary Fund's managing director Dominique Strauss-Kahn said Friday.

He said China's implementation of the massive fiscal stimulus and the adjustment of its economy towards a domestic consumption-driven model is the right thing to do and should have been done even without the financial crisis.

"Has it been accelerated because of the crisis or because the policy-makers changed their minds? I don't care, but it is in the right direction and I expect the rebalancing process will continue to be supported," Kahn said at a news conference held on the sidelines of the Asia Pacific Economic Cooperation (APEC) Leaders' Week meetings.

Kahn said Asia will lead the world's recovery, ahead of the United States and the Europe rebounding from the recession.

The Washington-based IMF forecasted Asia would grow 2.75 percent in 2009 and 5.75 percent in 2010, both figures about 1.5 percentage points higher than the fund's May estimates. Seven leading industrialized economies were seen dropping by about 2.5 percent this year and only recovering to 1.25 percent growth next year.

"The worst is over but the recovery is sluggish." Kahn said the recovery is likely to take years and the phrase will differ from country to country.

The IMF chief also said he did not favor to push under-valued Asian currencies to appreciate. Instead, the values of these currencies are expected to rise in the coming years with the increase of household purchasing power as a result of the global economic rebalancing process.

"The adjustment in foreign exchange rates is not a pre- requisite. Rather, it is the consequence of a broader economic balancing package," Kahn said.