World economy

IMF worried about China

The International monetary Fund is concerned: China needs to do more against the vulnerability of its economy. Problems of the IMF in the financial sector, but also in the modernisation costs in the industry.

The warnings came at the end of an official fact-finding mission of the IMF through the country. Two weeks, analysts of the organization in Beijing, Shanghai and also in Inner Mongolia had been on the road. The latest forecasts are not overly optimistic: The Fund believes that the Chinese economy will increase in the next year, around six per cent.

The Chinese leadership is expecting a growth of at least 6.5 percent over the next five years. In the past year, the economy of China is still 6.9 per cent. This was the lowest growth for 25 years.

The medium-term Outlook for the Asian country had become unsafe, summed up the IMF in its assessments. IMF Deputy chief David Lipton said on Tuesday in Beijing, the sun also on the “opaque” Finance sector with a fast-growing credit issue but also a structural Overcapacity.

Overcapacity, bad loans

The government in Beijing wants to modernize the economy and the dependence on the Export decrease. For this you take less growth. The country suffers from excess capacity, particularly in the coal and steel industry, where millions of jobs will be eliminated.

IMF Deputy chief David Lipton

Lipton warned that the debt of Chinese companies is already high and growing fast. It was not in control. Especially in the case of state-owned enterprises had to be traded, in order to prevent serious problems.

Private companies in China complain that the often inefficient state-owned enterprises would be preferred for lending compared to the private sector. Problems with bad loans is likely to not run out of control, warns the IMF. Therefore, there should be a careful supervision of the entire financial system, not just the big banks, said the Deputy head Lipton.

ar/hb (rtr, IMF)