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IMF Says China Should Target 6.5-7% GDP Growth For 2015

July 30, 2014

BEIJING (Alliance News) - The International Monetary Fund said China should target 6.5-7% growth for 2015, lower than the 7.5% goal for this year, and deploy stimulus only if growth were to slow significantly below the target.

While most of its directors estimate 6.5-7% growth, a few others assessed a lower target as more appropriate, the IMF said in a report published late Wednesday.

The Washington-based fund reiterated that the growth will slow to 7.4% in 2014 and to 7.1% next year.

According to the IMF, a further slowdown in investment, especially in real estate, would be only partly offset by stronger external demand from the continuing global economy.

The country needs to implement the announced reform agenda and address vulnerabilities to secure a safer development path, said the IMF.

The lender said broad-based stimulus should only be deployed if growth risks slowed significantly below the authorities' target. If such stimulus become necessary, then it should be applied through fiscal policy.

In order to address vulnerabilities, additional measures are required to reduce local government off-budget spending, cut credit growth and lower investment growth. Although these measures will reduce growth in the near term, it will bring considerable benefits over time in terms of higher income and consumption, it said.

According to IMF staff's assessment, the renminbi is moderately undervalued, by 5-10%. The directors assessed that the exchange rate of renminbi has become increasingly flexible.

Further, the lender observed that the previous appreciation of yuan helped to reduce external imbalances and the current account surplus fell to 1.9% of GDP last year.

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Source: Alliance News

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