China is transitioning to a slower yet safer and more sustainable growth, the International Monetary Fund (IMF) said in a report released Friday.
The world’s second largest economy is expected to expand by 6.8 percent this year, down from the 7.4 percent pace recorded in 2014, it said.
The slowdown, in line with Beijing’s target of around 7 percent, reflects progress in addressing vulnerabilities, especially a needed moderation in real estate investment, the IMF said in an annual report on China.
The recent stock market correction will not derail the ongoing adjustment to a slower yet more balanced growth path, according to the Washington-based institution.
“The labor market has remained resilient despite slower growth, as the economy pivots toward the more labor-intensive service sector. This, in turn, has supported household consumption,” the IMF said in a statement posted on its website.
The IMF considers China’s recent move to improve its exchange rate formation system as “a welcome step” to allow market forces to have a greater role in determining the exchange rate.
It reiterated that Beijing can, and should, aim for an effectively floating exchange rate regime within two or three years.
“The challenge now is to take the next steps to a more open and market-based economy,” said Markus Rodlauer, IMF mission chief for China.
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