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IMF: China's economy to grow 7.75% in 2013

Updated: 2013-05-29 18:25
( Xinhua)

BEIJING - The International Monetary Fund (IMF) said  Wednesday that the Chinese economy is expected to grow by around 7.75 percent this year despite weak and uncertain global conditions.

The IMF's first deputy managing director David Lipton made the remarks at a press briefing held after the completion of the 2013 Article IV Consultation Discussions with China.

Economic growth should pick up moderately in the second half of the year after credit expansion gains traction, Lipton said, adding that the prediction is in line with an expected mild pick-up in the global economy.

Inflation is expected to hit 3 percent around the end of the year, while the external current account surplus is expected to remain around 2.5 percent of the GDP, he said.

Although progress has been made in external rebalancing, China's growth is still too dependent on investment, particularly in the property sector and by local governments, he said.

Lipton said high income inequality and environmental problems are further signs that the current growth model needs to change.

Chinese authorities have announced reforms intended to address these challenges in 2013.

During discussions between the IMF and authorities, the Chinese side emphasized its intention to embark on a comprehensive reform agenda that will ensure more balanced, inclusive and environmentally friendly growth.

While China still has significant policy space and financial capacity to maintain stability, the margins of safety are narrowing, Lipton said, adding that a decisive impetus to reform is needed to contain vulnerabilities and move the economy to a more sustainable growth path.

Chinese authorities are focusing on the financial sector, fiscal reforms and other measures to strengthen price signals and the framework for a well-functioning market.

"Reining in total social financing growth is a priority and will require further tightening of prudential oversight as well as, critically, improved investor accountability for their investment decisions," Lipton said.

He predicted that the policies may slow activity in the short-term, but would do so in a way that supports the transition to a more sustainable growth path.

"It is important to gradually reduce the deficit over the medium-term to ensure a robust and sustainable debt profile," Lipton said, adding that continuing tax reform and a comprehensive re-ordering of local government finances, realigning resources with spending needs and revamping the framework for local government investment and borrowing will be key elements of these efforts.

Lipton acknowledged that the measures represent a challenging reform agenda that will require strong determination and administrative capacity to implement.

But the country's success will benefit both China and the rest of the world, reflecting the growing importance of China and its integration with the global economy, Lipton said.

An IMF team visited China from May 15 to 29 to conduct the annual Article IV review of the Chinese economy. The team held discussions with senior officials from the government, the central bank, financial regulators, private sector representatives and academics to exchange views on the economy and the challenges ahead.