Quick Take: IMF Projects Strong 2017 GDP Growth of 6.7% for China

(Beijing) – The International Monetary Fund (IMF) projects China’s GDP will grow at 6.7% this year, an improvement from its earlier 6.6% prediction.

The IMF cited China’s policy support for expansionary credit and public investment for why the country will be able to maintain strong growth.

Strong growth sets a good foundation to pursue reform and structural adjustments, David Lipton, the IMF’s first deputy managing director, said at a news conference on Wednesday.

The Chinese economy needs to be constantly renewing itself and moving away from activities that are no longer contributing to its economy, Lipton said. The steel and coal sectors, for example, are no longer as profitable as they once were. The coal sector also contributes to pollution and thus undermines the quality of economic growth. China will need to “right size” and downsize in some cases, Lipton said.

China has the potential to safely sustain strong growth over the medium term, an annual IMF mission to China concluded. The mission noted that important regulatory action is being taken against financial sector risk, corporate debt growth is slowing, and the housing price boom is gradually being contained.

The IMF mission’s report comes three weeks after Moody’s Investors Service downgraded China’s sovereign credit rating, citing concerns over rising debt levels. The issuer rating on local- and foreign-currency debt was lowered one notch from Aa3 to A1, the fifth-highest level, the same ranking as Japan, Saudi Arabia and the Czech Republic.

Contact reporter Liu Xiao (liuxiao@caixin.com)