TOKYO- China has room to ramp up stimulus if its economy slows further due to the coronavirus outbreak, but should not lose sight of structural reforms to address rapid credit growth, a senior International Monetary Fund official said on Wednesday.
Changyong Rhee, director of the IMF’s Asia and Pacific Department, said China’s growth rate has been moderating even before the outbreak of the coronavirus because of “desirable” steps by its government to deleverage its economy.
Beijing will likely rely more on stimulus measures this year to keep its economy afloat, though the direct boost to growth will be smaller than past fiscal measures that focused on big infrastructure spending, he told a news conference in Tokyo.
“We understand that if the coronavirus cases slow the Chinese economy … they have policy room” to provide more fiscal stimulus, Rhee said. “But we really hope that they can also (continue to) do … structural reform and credit control,” he added.
Chinese policymakers have implemented a raft of measures to support the economy as investors feared the epidemic, which has claimed the lives of over 1,100 people in China, could have a damaging impact growth.
The World Health Organization (WHO) warned of a global threat potentially worse than terrorism.
Rhee said while it was too early to assess the impact of the coronavirus outbreak on Asian economies, it did add to risks to the region’s growth outlook.
“(We) don’t want to deny this event definitely increases the downside risk. Especially the downside risk will be large for countries which have close ties with China,” he said. – Reuters