Nothing coming from China is real.
All economic numbers are totally ‘massaged’ to the upside, whereas power consumption is collapsing.
– China’s growth forecast lowered by IMF (Guardian, May 29, 2013):
China needs ‘continued liberalisation and reduced government involvement’ in economy, says deputy IMF managing director David Lipton
China needs to make a “decisive push” to launch new market-oriented reforms and has to control rapid credit growth that could lead to financial problems, the International Monetary Fund said on Wednesday.
The fund trimmed its growth forecast for China this year from 8% to 7.75% because of weaker global demand but said the Chinese economy should remain robust.
The president, Xi Jinping, and other leaders who took power in November have promised to make China’s economy more productive but have yet to disclose details. The World Bank and other advisers say Beijing urgently needs to curb the dominance of state companies and promote free-market competition or growth will decline sharply.
In meetings with visiting IMF officials, Chinese leaders emphasised their desire to nurture “more balanced, inclusive” growth, said David Lipton, a deputy IMF managing director.
“They need continued liberalisation and reduced government involvement [in the economy], allowing a greater role for market forces,” Lipton told reporters.
The government-dominated economy requires “a decisive push to promote rebalancing – rebalancing toward higher household incomes”, he said.
A key hurdle for reformers will be potential resistance within the ruling Communist party to changes that might hurt revenues for politically favoured state companies that dominate industries including banking, telecommunications, shipping and energy.
“Allowing more competition in sectors currently considered strategic would improve economic growth,” said Lipton. He said change would require “strong determination”.
The IMF also stressed the need for Beijing to pay attention to explosive credit growth that has helped to drive its economic rebound.
Private sector analysts estimate “total social financing” – the government’s term for credit from both the state-owned banking industry and informal private sources – rose 58% in the first quarter over a year earlier.
Lipton said the rapid rise in lending increased the risk that some investments might be of poor quality and borrowers might default.
“Growth has become more dependent – perhaps too dependent – on the continued expansion of investment,” Lipton said. “Reining in total social financing and its growth is a priority.”