Growth still healthy, says imf official

Although economic growth has slowed in China, it is still in healthy territory, said Olivier Blanchard, chief economist of the International Monetary Fund.

China is expected to grow between 7 percent and 8 percent at the current stage.

But as it shifts to domestic consumption and services for growth, it could sustain a 6 percent growth rate in the longer term, Blanchard said during the IMF-World Bank annual meeting, which opened in Washington on Oct 10.

"Less growth, but better growth for China," Blanchard said.

"It's like a marathon. If you run at 10 percent a year, that may be possible, but you will have problems of pollution, urban tensions and all kinds of other issues," Blanchard said. "Even 6 percent is a good number, much better than many other countries," he said.

"Housing prices will come down. We do not think it will become a big financial or fiscal issue. It becomes catastrophic when a decrease in housing prices leads to bankruptcies of banks and households. That's not the case we currently see in China," he said, citing the relatively low household leverage rate and mortgage rate in China.

He noted that the shadow banking sector poses some problems, but the banks behind the shadow banking system have enough resources if needed. "If there were problems with the banks, the government itself is in a strong position to help," he said.

Despite the downward risks, he underscored that China still has a long way to go in restructuring its economy from too much dependence on investment to consumption-led growth, given that investment is still on the rise in China to make up for the loss of momentum from exports.

The IMF lowered its projection for the global economic outlook to growth of 3.3 percent this year and 3.8 percent for 2015, as it believes that the world is still grappling with the impact from the global financial crisis and the emerging problem of lower potential growth.

Blanchard said the world economy is not expected to be completely back to normal until 2016, at best, as the impacts of the 2008-09 global financial crisis are much bigger than the Great Depression in the 1920s and 1930s and hence will take a longer time to recover.

(China Daily European Weekly 10/17/2014 page20)