The fund’s forecast for this year’s GDP growth dropped to 7.75 per cent yesterday, down from eight per cent in April. January’s estimates for 8.2 per cent growth had already been slashed. If the new figure proves to be correct, growth would be at a 14-year low for China
The IMF raised concerns about income inequality, as well as environmental and financial imbalances, saying these would be challenges for Chinese authorities in the future.
The country’s new Premier, Li Keqiang, who was previously an economist, drew attention to the necessary difficulty of impending economic reforms when he took office two months ago, comparing the process to severing a hand.
Proposals from the IMF included increased liberalisation of financial markets, alongside increased accountability for lower-level state organisations.
IMF managing director David Lipton said: “allowing more competition in sectors currently considered strategic will boost growth and household income” adding, “a broad range of structural reforms will support the transition to more balanced and inclusive growth”.
Prior to the financial crisis, Chinese growth rates were regularly above eight per cent. The World Bank recorded a 14.2 per cent growth rate as recently as 2007. Last year, the economy grew by 7.8 per cent.
The Organisation for Economic Co-operation and Development also drew attention to slower levels of Chinese growth in yesterday’s economic outlook. The expansion of domestic demand at a slower rate was referenced as the most significant contributing factor.