IMF releasing a report on China says a push for decisive reforms are needed to maintain growth.
- Leaves 2013 growth forecast at 7.75%, which is above the Chinese forecast of 7.5% (depending on the latest photoshopped report)
- Needs to reign in credit growth, prevent further risk build up in financial sector
- Fiscal stimulus only needed if growth falls too sharply below government target
- Yuan moderately undervalued
- Calls for a revamp of local government finances and notes significant expansion of local govt debt levels
- Notes increase in shadow bank activity which could lead to piles of hidden bad debt becoming a risk to financial stability
The fact the IMF still see growth above Chinese forecasts is surprising. At the end of the day an IMF report on China is worlds away from a report on other major economies in terms that the Chinese won’t give a damn.