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IMF/ CHINA
STORY: IMF / CHINA
TRT: 2.08
SOURCE: IMF
RESTRICTIONS: NONE
LANGUAGE: ENGLISH / NATS
DATELINE: 8 JUNE 2012, BEIJING, CHINA
1. Wide shot, press conference
2. SOUNDBITE (English) David Lipton, First Deputy Managing Director, IMF:
“Reflecting the withdrawal of policy stimulus last year and slowing global demand, growth will likely moderate to around 8 percent this year in China. We support the authorities’ ongoing effort to promote higher quality growth while at the same time fine-tuning macroeconomic policies to help ensure that growth does not slow too much.
3. Cutaway, cameraman
4. SOUNDBITE (English) David Lipton, First Deputy Managing Director, IMF:
“Over the past several years, China has made significant progress in reducing external imbalances. The current account surplus, for example, has declined very sharply from 10 percent of GDP in 2007 to less than 3 percent of GDP last year and the real trade-weighted value of the renminbi has appreciated. With these developments, the undervaluation of the currency has been reduced. We at the IMF now assess the renminbi to be moderately undervalued against a broad basket of currencies.”
5. Cutaway, journalists
6. SOUNDBITE (English) David Lipton, First Deputy Managing Director, IMF:
“The external rebalancing, however, has come in large part with an increasing reliance on investment. This fact brings with it a set of risks around the worthiness of those investments and the sustainability of this approach. As the government acknowledges, reforms are needed to achieve quality growth that relies less on investment, more on consumption, and is environmentally friendly. In our view, these should include measures to raise household income, liberalize the financial system, strengthen the social security system while also lowering social contribution rates, appreciate the exchange rate, and increase the cost of various inputs to production.”
7. Wide shot, presser
With global demand slowing and heightened risks, particularly from Europe, weighing on the world economy, China’s growth rate is expected to moderate in 2012 to around 8 percent from 9.2 percent last year, the International Monetary Fund (IMF) said in its annual health check of the world’s second-largest economy.
“Reflecting the withdrawal of policy stimulus last year and slowing global demand, growth will likely moderate to around 8 percent this year in China. We support the authorities’ ongoing effort to promote higher quality growth while at the same time fine-tuning macroeconomic policies to help ensure that growth does not slow too much,” said First Deputy Managing Director David Lipton.
However, Lipton said inflation was under control and Beijing had room to support activity in case of a more serious global downturn. China’s growth in 2010 was above 10 percent.
Lipton said that over the past several years, China had made significant progress in reducing external imbalances with other parts of the world.
The current account surplus has declined sharply from 10 percent of GDP in 2007 to less than 3 percent of GDP last year. The Chinese renminbi was now no longer "substantially undervalued" but rather “moderately undervalued,” according to preliminary analysis by IMF economists.
“Over the past several years, China has made significant progress in reducing external imbalances. The current account surplus, for example, has declined very sharply from 10 percent of GDP in 2007 to less than 3 percent of GDP last year and the real trade-weighted value of the renminbi has appreciated. With these developments, the undervaluation of the currency has been reduced. We at the IMF now assess the renminbi to be moderately undervalued against a broad basket of currencies,” Lipton said.
The priority over the next 5-10 years was to shift China’s economy toward a more consumer-based growth model that also aims to address rising inequalities by promoting more inclusive growth. The IMF team was led by Markus Rodlauer. Lipton made these remarks after joining the final policy discussions in Beijing. He met with Chinese Vice Premier Wang Qishan and held in-depth discussions with People’s Bank of China Governor Zhou Xiaochuan, Finance Minister Xie Xuren, and other senior Chinese officials.
“The external rebalancing, however, has come in large part with an increasing reliance on investment. This fact brings with it a set of risks around the worthiness of those investments and the sustainability of this approach. As the government acknowledges, reforms are needed to achieve quality growth that relies less on investment, more on consumption, and is environmentally friendly. In our view, these should include measures to raise household income, liberalize the financial system, strengthen the social security system while also lowering social contribution rates, appreciate the exchange rate, and increase the cost of various inputs to production,” Lipton said.
The IMF supported China’s ongoing effort to promote higher-quality growth while at the same time fine-tuning macroeconomic policies to help ensure that growth does not slow too much. China’s timely and large economic stimulus in 2009–10 had succeeded in supporting domestic growth, shielding China’s population from the worst of the crisis, and helping the global recovery by providing a needed lift to world demand, he said.
In this context, Lipton argued for a package of reforms that would include measures to raise household income, liberalize the financial system, strengthen social security while also lowering social contribution rates, further appreciate the exchange rate, and increase the cost of various inputs to production. Lipton noted that these priorities also featured in China’s 12th Five-Year Plan, “but timely implementation will be key.”
The reform process, he said, needed to go faster to avoid a further build-up of risks and ensure a smooth transition to consumption-led growth. “Otherwise, domestic imbalances may unwind in a disorderly fashion and trigger an abrupt decline in investment.”
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