China has scope to keep monetary and fiscal policy supportive to help strengthen the economy’s recovery, a top International Monetary Fund official said.
(Bloomberg) — China has scope to keep monetary and fiscal policy supportive to help strengthen the economy’s recovery, a top International Monetary Fund official said.
“China has the policy space to keep monetary policy accommodative because inflation is very much muted,” Krishna Srinivasan, the IMF’s director for Asia Pacific, told reporters in Hong Kong on Tuesday. “It also has the fiscal space to provide support.”
The world’s second-largest economy grew at the fastest pace in a year in the first quarter, although more recent data for April shows the recovery may have lost some steam, particularly in manufacturing. Analysts have been debating whether the economy needs more stimulus or if the rebound in growth will prompt policymakers to begin scaling back support. Chinese leaders signaled last week they’ll stick to their relatively loose stance for now.
Srinivasan cautioned against reading too much into the weekly or monthly economic data, adding that the “dynamism of China’s economy is pretty strong.” Beyond that, though, policymakers will need to address longer-term challenges, especially in the property market, he said.
Thomas Helbling, deputy director for the IMF’s Asia Pacific department, said China’s support for real estate developers have benefited the stronger ones, and “what remains to be addressed are the weaker developers, which are still softening.” The IMF has called on the government to do more to “pro-actively support restructuring of weak developers,” he said.
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