IMF officials are confident that China’s economy is on a path of 8 percent growth and see no major short-term risks, the fund’s top adviser for the country said.
Markus Rodlauer, the IMF’s mission chief for China and deputy Asia-Pacific director in Washington, also repeated the fund’s position that the yuan is “moderately undervalued,” speaking in a Bloomberg Television interview on Thursday in Hong Kong.
China needs to let the currency trade more freely, Rodlauer said.
The comments indicate that the weakest start to a year for industrial production and retail sales since 2009 has failed to shake the optimism of IMF officials that the world’s second-largest economy will sustain a growth rebound.
Rodlauer said the expansion of so-called shadow banking bears watching, yet is not a threat to China’s financial system now.
“The last few months have really shown to us that this economy is on an even keel, on a growth path of somewhere around 8 percent,” Rodlauer said after speaking at the Credit Suisse Asian Investment Conference.
“We are quite confident that it’s going to be around eight” and see “no real short-term major risks,” he said.
Rodlauer did not discuss the IMF’s forecast from January for China economic expansion of 8.2 percent this year and 8.5 percent next year.
A report on Thursday showed China’s manufacturing is expanding at a faster-than-forecast pace this month as production and orders pick up.
The preliminary reading of a Purchasing Managers’ Index was 51.7 this month, according to HSBC Holdings and Markit Economics. A reading above 50 indicates expansion.
The IMF official said that China has made “a lot of progress” in letting its currency appreciate and that he’s “confident we will see further steps” in subjecting the exchange rate to more market forces.
The official said that China has made “a lot of progress” in letting its currency appreciate and that he’s “confident we will see further steps” in subjecting the exchange rate to more market forces.
The daily trading band for the yuan, now 1 percent, “is clearly something that needs to widen over the medium term,” Rodlauer said.
On risks from non-bank credit and municipal finance, Rodlauer said that the IMF has reviewed the issue “very carefully” and judged that it is not “of systemic concern right now.”
Aggregate financing, an indicator started by the People’s Bank of China in 2011 to provide a broader gauge of funding in the economy, more than doubled to a record 2.54 trillion yuan (US$409 billion) in January from a year earlier.
“It certainly is a trend that needs to be watched,” Rodlauer said.
Credit growth on the order of the last one or two years “cannot continue like this forever,” he said.