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IMF Advises China to be Discursive about Reforms

http://www.ctvnews.ca/business/imf-says-asia-to-lead-growth-in-2015-despite-china-slowdown-1.2362877

The International Monetary Fund (IMF) said that China must show "great flexibility" in terms of exchange rate policy as the country has slowdown growth rate, BBC reports. In other words China should reduce foreign exchange intervention. China’s Yuan has been undervalued for many years in order to boost exports and now when U.S. dollar is overvalued especially against Yuan the export from China to U.S. is growing.

IMF predicted China’s economic growth to stabilize at around 6 percent by 2017. China’s growth rate is reducing year by year, on the first quarter of 2015 it was 7 percent, last year it was 7.4 percent and in 2013 it was 7.7 percent. IMF in its last economic outlook said that China needs reforms that "reorient the economy away from excessive reliance on real estate, heavy industry, and external demand". It also added that the country should implement some points of the reforms immediately which apply to credit activities such as shadow banking. According to IMF the reforms are vital for sustainable growth for giant China.

Although the economic growth of China is 7 percent the country is the leader in the Pacific region. The recovery of India and Japan will help to offset the slowdown in China. The IMF forecasted 5.5 percent economic growth for the region for 2016. The overall growth in the each country is modest- for Japan it is forecasted 1 percent, for India 7.5 percent and for Myanmar 8.3 percent. Overall Asian growth fell from 5.9 percent to 5.5 percent in 2013, but China still remains to be the leader in the region, Ctvnews reports.

The director of the IMF's Asia and Pacific Department Changyong Rhee said that it is not possible to expect that a country can keep 10 per cent growth forever. He also added that the current phase of growth is in line with IMF forecasts, but even if it is a desirable slowdown it can have a negative impact on other countries. Low oil prices and low costs are a boon for business and for consumers for China as well for Japan and Pacific other countries.

Although China recorded slowdown growth in its economy it still remains a main driver of global GDP expansion. And the reforms among the country should be directed to productivity and strong consumption. It is also better for the country to reduce its dependence from the trade and to concentrate on investments that are crucial for the growth.

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