Christine Lagarde, Managing Director of International Monetary Fund told CGTN America’s Wang Guan she is “pleased” to see China’s economic rebalancing towards a consumer spending and service-based economy.
Commenting on China’s 6.9 percent GDP growth for the 1st quarter of 2017, Lagarde says Beijing’s economic stimulus has worked, but she warned against the country’s rapid credit expansion and the threat of a real estate bubble.
Earlier this week, the IMF raised 2017 world economic growth forecast to 3.5 percent, compared with 3.1 percent in 2016.
It also Increased China’s growth prospect to 6.6 percent for 2017. This week, Lagarde said the IMF sees a global economy with “a spring in its step.” After the 2008 market crash, many economists said two percent growth – that Lagarde called the “new mediocre” would become the “new normal.” Lagarde told CGTN there are now reasons to be more optimistic.
When asked about her comment that the post-recession world economy was the “new mediocre”, she said:
“When I referred to the “new mediocre”, there was a combination of two mediocres. The first one was growth, which was at around 3.1 percent, and the second one was the growth potential, which was also alarmingly medicore. The first one is certainly a lot better. And, as I said, growth is picking up and there is a momentum underway, which we need to sustain with right short-term policies. But the growth potential still needs a lot of work and there is clearly a need for policies that will support, encourage and improve productivity. So, we can move not just from low mediocre, to less low mediocre – which is how I would characterize our position now – to not mediocre at all, with the prospect strong growth potential going forward.”
She also commented on what role China has to play.
“As far as China is concerned. There is clearly good numbers coming out that is certainly a result of some stimulus – some encouragement from the Chinese authorities – and we are also quite pleased to see the re-balancing that is taking place in China, from being heavily geared towards investment to being more geared towards consumption, from being more into services and less so in manufacturing,” Legarde said.
“We are seeing, of course, the rebound of the export activities for obvious reasons, because demand addressed to China is picking up. So, all of that is good and supportive. We also, as you know, have some very specific recommendations to China in relation to credit growth, in particular, and to the reigning in of the housing sector, which despite efforts already undertaken, continues to grow.”