Home > Belt and Road > News > 

China beomes focus at IMF/WB annual meetings

From economic growth, financial risks, currency internationalization to the Belt and Road Initiative, China was frequently mentioned by financial officials at the just-concluded annual meetings of the International Monetary Fund (IMF) and the World Bank.

XinhuaUpdated: October 16, 2017

From economic growth, financial risks, currency internationalization to the Belt and Road Initiative, China was frequently mentioned by financial officials at the just-concluded annual meetings of the International Monetary Fund (IMF) and the World Bank.

As the world's second-largest economy, China's economic growth, the development of its financial markets, and its agenda of opening up and reform will have a major impact on the global economy and financial markets.

Maurice Obstfeld, chief economist at the International Monetary Fund (IMF), attends a press briefing at the IMF headquarters in Washington D.C., the United States, on Oct. 10, 2017. The IMF on Tuesday raised its global growth forecast for 2017 and 2018 due to a broad-based recovery in Europe, China, Japan and the United States. [Photo/Xinhua]

Strong growth with reforms

In its latest World Economic Outlook released on Tuesday, the IMF raised its forecast for China's economic growth in 2017 and 2018 to 6.8 percent and 6.5 percent respectively, both 0.1 percentage point higher than the earlier forecast in July.

For an economy with a total volume of over 11 trillion U.S. dollars, maintaining such a high growth is not easy, said Chinese Vice Finance Minister Zhu Guangyao.

China's stable economic growth mainly stems from major progress in economic reforms, particularly supply-side structural measures, and the government's ability to maintain a stable macroeconomic policy, he said.

While gains from structural reforms will come with a time lag, they really have a positive impact on China's economic growth in the medium-term, said Changyong Rhee, director of the Asia Pacific Department at the IMF, adding China's growth has also provided ample opportunities for Asia to maintain its growth over the last ten years.

"If China opens its market more to its neighbors in Asia, to the world, that would really boost up the regional as well as the global growth rate," he said, noting China alone now accounts for 34 percent of global growth.

While China has made "significant progress" in rebalancing from the export sector to domestic demand, China is still relying too much on investment growth, he said, suggesting China build a social safety and boost consumption to move towards more balanced domestic demand-led growth.

Financial risks under control

Despite the positive revision of China's growth, the IMF has urged the Chinese authorities to intensify efforts to rein in credit expansion and strengthen financial resilience.

"The reform of the SOEs (state-owned enterprises) and the continued reining in of credit in order to control the financial risk in China will be most welcome," IMF's Managing Director Christine Lagarde said Thursday at a press conference.

"In recent years, due to factors such as economic slowdown, structural adjustment, and high volatility in the international financial markets, potential risks in China's financial industry have increased, but in general, the risks are manageable," said Zhou Xiaochuan, governor of the People's Bank of China (PBOC).

"The Chinese government has the capacity and confidence to prevent systemic risks and maintain healthy and stable economic operations," Zhou said Saturday in a statement sent to the International Monetary and Financial Committee (IMFC) meeting.

According to Zhou, China has set financial risks control as a top priority, and has taken measures to control risks in shadow banking, reduce corporate leverage, and prevent property market overheating in some areas.

With the central government seeking to strictly control the debts of local governments and state-owned enterprises, the policy to prevent debt risks is yielding results, Zhu echoed.

Taimur Baig, chief economist with DBS Bank in Singapore, said at an event held by the Institute of International Finance (IIF), that now everybody is significantly more comfortable about the Chinese government's ability to manage its economy and the financial sector.

Internationalization of RMB

It has been one year since the Chinese currency renminbi (RMB), or yuan, was included in the IMF's special drawing rights basket last October, which was a milestone for the global economy and a big step in the internationalization of the RMB.

"Many people say that, you know, after the inclusion of the yuan, yuan use hasn't increased very much, but I think that's too myopic," Rhee said, adding it's not wise to assess the international use of the yuan by just looking at the quarterly data, as the internationalization of the yuan will take time.

Given the size of China's trade and the Chinese economy, "I'm very confident that the yuan's use in the global market will increase," he said, recommending China adopt a gradual approach in capital market liberalization to promote the global use of the yuan.

Markus Rodlauer, deputy director of the Asia Pacific Department at the IMF, also said "there is no doubt in my mind that RMB internationalization will continue over the medium term" as long as China's rebalancing effort continues successfully.

"It will not be a straight line, because like everything else in economics, there will be ups and downs, and we have over the past year, perhaps, witnessed a bit of flattening out of the process," he said.

Belt & Road Initiative

China's Ministry of Finance and the World Bank on Thursday held a high-level seminar on the Belt and Road Initiative for the first time during the bank's annual meetings.

As an open and inclusive platform, the initiative could help deepen international cooperation in development and faster economic integration in the region, said Chinese Vice Finance Minister Shi Yaobin.

Cooperation with the World Bank could also mobilize participation of more multilateral development banks, private sectors and other funding sources, and create all-win solutions, he said.

World Bank President Jim Yong Kim, who is a strong supporter of the initiative, said the bank plans to hold the seminar on the initiative during spring and annual meetings every year so as to discuss how to promote free trade and global growth.

Zhu, who on Thursday attended another seminar on the Belt and Road Initiative co-hosted by the European Bank for Reconstruction and Development, U.S. Center for Global Development, and Reinventing Bretton Woods Committee, said it was the first time he had attended a seminar on the initiative organized entirely by foreign institutions.

This indicated that the international community was paying high attention to the initiative, and had great expectations for its contribution to global economic development, he said.

International financial organizations have recognized the Belt and Road Initiative as "the most important public product in today's world," Zhu added, calling it an important Chinese contribution to global peace and development.

The initiative, proposed by China in 2013, aims to revive the ancient trade routes through an overland Silk Road Economic Belt and a 21st Century Maritime Silk Road, to enhance trade, infrastructure and people-to-people connections between Asia, Europe and Africa.