The International Monetary Fund (IMF) directors welcomed China's already substantial fiscal support to stimulate the economy, and believed that fiscal support should be maintained in 2010, according to an IMF report released on July 22.
China has been hit hard by the global economic crisis, but the Chinese government has responded with decisive monetary and fiscal policies, offsetting the drag from declining world demand and falling private investment, the IMF executive board said in its report of consultation with China. However, the pace and timing of the global recovery is still uncertain.
"Given the low level of public debt, they (the directors) generally saw further room for a targeted, additional stimulus aimed at increasing private consumption through near-term fiscal measures to raise household income. Directors were of the view that fiscal support should be maintained in 2010," said the IMF.
In its recently upgraded World Economy Outlook Report, the IMF expected China's GDP to grow 7.5 percent in 2009.
The IMF also supported the recent loosening of monetary policy. While China's financial sector has shown its resilience to the global turmoil, the directors called for continued vigilant monitoring of possible risks to credit quality, especially from lending to infrastructure projects or from a further buildup of excess capacity in tradable industries.
The directors agreed that the monetary expansion would need to begin to be unwound once the economic recovery is firmly established.
