Craig Eisele on …..

February 1, 2012

IMF plays down risk of China “hard landing”

Filed under: Uncategorized — Mr. Craig @ 3:29 pm

IMF plays down risk of China “hard landing”

WASHINGTON (Reuters) – A senior International Monetary Fund official said on Monday that China was taking steps to reduce property bubble risks and said it has room to add fiscal stimulus if conditions worsen.

“China can move away from its reliance on external demand and needs to build up domestic demand,” said Anoop Singh, the IMF director for Asia and the Pacific at a news conference. He said Beijing was working on measures to stimulate demand.

“We don’t see (a) hard-landing risk as likely,” Singh added, noting property prices were moderating and sales volumes declining.

“Our sense is that these risks are being addressed and our prediction is clear: that growth will remain above 8 percent at the baseline and that if there were to be greater risks externally China has sufficient fiscal space to respond.”

China’s economy is being weighed down by slowing growth in the United States and the European Union, but the possibility of a hard landing should be ruled out, said David Lipton, first deputy managing director of the International Monetary Fund.

“I don’t see China having a ‘hard landing’,” Lipton told Hong Kong’s Trade Development Council (TDC) in an interview ahead of the January 16-17 Asian Financial Forum, which he will attend. The forum is being held in Hong Kong by the city government and trade promotion body.

“What we subscribe to is that China’s growth is moderating somewhat from a very rapid rate that they experienced last year,” he said.

Slowing Chinese economic growth was due to weaker exports and measures taken by Beijing to cool its property market and limit credit expansion, Lipton added.

China’s annual economic growth in the fourth quarter of 2011 may have slowed to 8.7 percent from 9.1 percent in Q3, according to the latest Reuters poll.

The National Bureau of Statistics is due to publish GDP and other economic activity data at 0200 GMT on January 17.

Lipton also said Hong Kong’s asset and property prices had “crested,” and that he still saw no prospect of the Chinese yuan being included in IMF’s Special Drawing Rights (SDR) basket of currencies.

The yuan, also known as the Renminbi (RMB), has to be a freely convertible currency before it can become part of the SDR basket, he said.

“I know China has been trying to broaden the use of the RMB and its usage internationally. I don’t think there’s really a prospect of the RMB entering the SDR basket any time soon,” he said, adding that yuan internationalization was a process that would take a long time.

Lipton said it was important for Asian economies to strengthen domestic demand in the face of a weakening external environment.

He said the IMF was “very concerned about the implications of what’s going on in Europe for countries around the world. There have already been some spillovers from the situation.”

(Reporting by Charlie Zhu and Vikram Subhedar; Editing by Chris Lewis)

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