Long Term Slowdown in China Could Spillover on Global Economy

Prolonged slowdown in the Chinese economy would have substantial spillover on the global economy, IMF Managing Director Kristalina Georgieva said on Thursday. However she added that Beijing has room to adjust policy to provide support.

The IMF has cut its growth forecast of China this year to 4.4% which is below Beijing target of around 5.5%.

In a video speech to the annual Boao Forum for Asia, Georgieva said China’s actions to counter its economic slowdown are vital for the global recovery.

“Fortunately, China has policy space to provide macroeconomic policy support, including shifting the focus toward vulnerable households to strengthen consumption, which can also help support China’s climate goals by steering economic activity to lower-carbon sectors,” Georgieva added.

“Stronger policy efforts in the property sector can also help secure a balanced recovery.”

During the same forum, , China’s President Xi Jinping said China’s economy is resilient and that its long-term trend had not changed.

Chinese economy saw wide GDP growth forecast cut from foreign brokers, with Barclays has cut forecasts below consensus to 4.3% from 4.5%, BofA to 4.2% from 4.8% and Nomura to 3.9% from 4.3%.

“What we see in China is that consumption is falling short, it is not recovering as strongly as necessary,” Georgieva told a news conference at the IMF and World Bank spring meetings on Wednesday.

“So rather than moving money into public investments, move it into the pockets of people, so there is more dynamism coming from a consumption boom.”