IMF urges China to make reforms for betterment of economy. (Photo : Getty Images)
The International Monetary Fund (IMF) is calling for China to make urgent reforms on the financial risks that the economy is facing in the wake of the fund’s previous warning about corporate debts.
A press release posted on their website on Tuesday revealed the IMF's comments on the Chinese economy after a mission led by Assistant Director of the Asia and Pacific Department James Daniel to the country's capital, Beijing.
According to the statement, IMF's First Deputy Managing Director David Lipton also convened with senior officials, including Vice Premier Ma Kai and People's Bank of China Governor Zhou Xiaochuan, among others, to tackle the country's financial dilemmas.
Based on their findings, the IMF deemed China to be at "a crucial juncture," noting that while the country is at "a sustainable growth path and is making progress on many dimensions of rebalancing," the Asian giant should consider addressing vulnerabilities the mission found during their two-week stay in the country.
Vulnerabilities
During Lipton's meeting with top Chinese officials involved in the country's economic progress, he noted a couple of things that they should consider in order to pursue China's sustainable growth in the long run.
"China continues its transition to a sustainable growth path and is making progress on many dimensions of rebalancing," he began. "The success of this transition, while difficult and bumpy at times as we have witnessed over the past year, is crucial for China and the rest of the world."
While there may be growth, Lipton noted that there was also "uneven progress," which should be addressed immediately for the sake of the second biggest economy in the world, as cited in a report from CNBC.
He noted that there are "less improvement in governance and hardening SOE budget constraints," which eventually would lead to vulnerabilities such as structural excess capacity, rapidly rising credit, and "the increasingly large, opaque, and interconnected financial sector."
Previous Warning
Prior to the release of Tuesday's statement, the IMF had also issued a warning to China with regard to the country's debt risks.
"Corporate debt remains a serious--and growing--problem [in China] that must be addressed immediately and with a commitment to serious reforms," Lipton said in Shenzhen as cited by the Financial Times.
He further noted that such problems in the second biggest economy can bring the entire international community down.
"We have learned over and over in the past 20 years how disruptions in one country's economy and markets can reverberate worldwide," Lipton added.
