China’s near-term economic outlook is being buoyed by policy support even as its medium-term prospects become more uncertain because of rapidly rising credit, excess industrial capacity and financial sector risks, the International Monetary Fund said.
Start your day with what’s moving markets.Get our markets daily newsletter.Sign UpOverall reforms have advanced impressively in areas from shifting to services as a greater driver of growth to liberalization of financial markets, the IMF Deputy Managing Director David Lipton said in a press statement at the conclusion of its annual Article IV review of China’s economy in Beijing. Because of a lack of progress reining in credit growth and hardening budget constraints on state enterprises, vulnerabilities are still rising even as the buffers to deal with shocks are eroding, he said.
A plan to address high and fast-rising corporate debt is "imperative" to avoid "serious problems" down the road and a comprehensive plan is needed to harden budget constraints on state enterprises, restructure or liquidate weak firms and recognize and and allocate losses, Lipton said.
