Date
25 September 2017
IMF's David Lipton says China must use fiscal levers, rather than broad stimulus, to support the economy. Photo: Bloomberg
IMF's David Lipton says China must use fiscal levers, rather than broad stimulus, to support the economy. Photo: Bloomberg

IMF’s Lipton urges caution in any China stimulus effort

A senior official of the International Monetary Fund (IMF) said he didn’t see evidence of a significant slowdown in China’s economy and advised Beijing to be cautious in any stimulus initiatives, the Wall Street Journal reported.

If growth falls substantially below 7.4 percent this year, and officials see the need for stimulus, “we would suggest that it’s best not to return to low interest rates, [more] credit and investment,” David Lipton, IMF’s deputy managing director, was quoted as saying.

Instead, authorities should “find ways to use fiscal levers to support household income and spending,” he said.

“We prefer a more targeted approach to stimulus,” Lipton was quoted as saying in an interview.

So far China has taken a small-step approach, dubbed by analysts as “mini-stimulus,” to combat slowing growth. But there are doubts whether Beijing will continue with that approach, especially if growth falls much below the official target of around 7.5 percent, the report noted.

Lipton, who was in Beijing to discuss China’s economy with senior officials as part of the IMF’s annual review, said the slowdown in the mainland housing sector is “potentially problematic”.

But cutting interest rates to boost construction would be short-sighted, he said, warning that such approach would produce “growth that isn’t sustainable.”

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RC

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