Tokyo: China must overcome financial risks in “clear and coordinated modes” and temporarily change their fiscal policy into a neutral attitude from this year’s contractioner approach, the International Monetary Fund said in a statement released on Friday.
“China’s recovery is very advanced, but not balanced and momentum slows down, even as the downside risk of accumulating,” the IMF said in a statement from the staff involved in the recent article IV consultation concluded with China.
The IMF blamed a slowdown for a quick policy policy withdrawal in China, hit the consumption of the Covid-19 outbreak, a recent power outage and a slowdown in real estate investment.
“Fiscal policy, which has significantly contracted this year, must temporarily have to switch to a neutral and focus on strengthening social protection and promoting green investment than traditional infrastructure spending,” he said.
The IMF also called for “a comprehensive bank restructuring approach” to strengthen the Chinese banking system, as well as efforts to open markets and reform state-owned enterprises.
Sustainable efforts to overcome high corporate leverage must be accompanied by establishing “bankruptcy frameworks and market-based resolutions,” IMF said.
The IMF also warned that Beijing’s strict regulations on the technology sector had increased policy uncertainty.
The Chinese property sector misery has jerked the financial market and gives doubts about the growth prospects for the second largest economy in the world.
The IMF expects China’s economy to grow 8.0% this year and 5.6% next year, even though the statement said the downside risk of estimates “accumulated.”