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IMF calls for public spending to boost China's consumption

(Xinhua)
Updated: 2007-01-27 14:18

The Chinese government needs to shift spending to health, education and welfare to help boost consumption and refocus economic growth, the head of the International Monetary Fund (IMF) said inBeijingon Friday.

IMF managing director Rodrigo de Rato Figaredo said he strongly supported the government's plans for a wide range of far-reaching social and economic reforms.

Rato, who is in Beijing on his fourth visit to China as IMF head, said he agreed with the authorities that sustaining China's rapid pace of growth required refocusing the economy away from its heavy dependence on investment and exports and towards consumption.

He said it also meant that prosperity be shared more equally across society, which required rural-urban income discrepancies to be addressed, and environmentally sustainable economic development.

He said fiscal policy had a central role in China's economic balancing.

"To increase consumption and reduce savings, China's house holdsneed to be reassured of adequate provision of health care, education and pensions, with a shift in public expenditure to these areas."

Rato met with Premier Wen Jiabao earlier on Friday, and held what he called "fruitful discussions" with Finance Minister Jin Renqing and People'sBank of ChinaGovernor Zhou Xiaochuan.

"Rebalancing such a large economy will require a wide range of policy reforms, and China's policymakers are keenly aware of what needs to be done," he told reporters.

"In the near term, curbing rapid credit and investment growth continues to be critical to prevent overcapacity in certain sectors, and to put growth on a more sustainable footing. Improving the intermediation of China's large savings through further strengthening and developing the financial system and capital markets is key."