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IMF Country Report No. 18/240
PEOPLE’S REPUBLIC OF CHINA
2018 ARTICLE IV CONSULTATION—PRESS RELEASE; STAFF REPORT; STAFF STATEMENT AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR THE PEOPLE’S REPUBLIC OF CHINA
July 2018
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2018 Article IV consultation with the People’s Republic of China, the following documents have been released and are included in this package:
A Press Release summarizing the views of the Executive Board as expressed during its July 18, 2017 consideration of the staff report that concluded the Article IV consultation with the People’s Republic of China.
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on July 18, 2018, following discussions that ended on May 30, 2018, with the officials of the People’s Republic of China on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on June 28, 2018.
An Informational Annex prepared by the IMF staff.
A Staff Statement updating information on recent developments.
A Statement by the Executive Director for the People’s Republic of China.
Copies of this report are available to the public from
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© 2018 International Monetary Fund
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PEOPLE’S REPUBLIC OF CHINA
STAFF REPORT FOR THE 2018 ARTICLE IV CONSULTATION
June 28, 2018
Key Issues
Context. China is at an historic juncture. After decades of high-speed growth, the authorities are now focusing on high-quality growth. Whether and how this shift is carried through will determine China’s development path for decades to come. Recent strong growth momentum and significant financial de-risking progress reduce the probability of a near-term abrupt adjustment. Rebalancing accelerated in some dimensions, especially as the current account surplus continued to fall and growth became less dependent on credit, but progress slowed in many other dimensions as exports drove the growth pick up, rather than consumption. And while credit growth has slowed, it remains excessive.
Policies. Staff sees tensions in the authorities’ strategy between, on the one hand, the stated goals of stabilizing leverage, allowing market forces a decisive role, and greater innovation and opening-up, and, on the other, still-unsustainable debt growth, the pervasive role of the state in the economy, and the relatively restrictive trade and investment regime in some areas. To achieve the desired higher-quality development will require addressing these policy tensions by building on the existing reform agenda and taking advantage of the current growth momentum to “fix the roof while the sun is shining.” Key elements:
Continuing to rein in credit growth
Accelerating rebalancing efforts
Increasing the role of market forces
Fostering openness
Modernizing policy frameworks
China’s GDP could overtake the U.S. by 2030, absent shocks
(Nominal GDP in USD trillions, assuming market exchange rate of 2017)
Citation: IMF Staff Country Reports 2018, 240; 10.5089/9781484370797.002.A000
Source: IMF staff estimates.Outlook. The near-term outlook remains robust due to strong domestic momentum, recovering global trade, and significant reform progress. External risks have risen, with tightening global financial market conditions and rising trade tensions. The longer-term outlook depends on the policies deployed to achieve the authorities’ goals—determined market-based reforms could lead to sustained, stable, and still-strong growth, whereas continued state- and credit-driven policies would likely lead to continued resource misallocation and a further build-up of risks, raising the likelihood of an eventual abrupt adjustment and dimming long-term growth prospects.
Approved By
Markus Rodlauer and Petya Koeva Brooks
Discussions took place in Shenzhen and Beijing May 17–30, 2018. The team comprised J. Daniel (head), S. Das, D. Ding, S. Jain-Chandra, E. Jurzyk, R. Mano (all APD), M. Catalan (MCM), G. Li (FAD), C. Tovar (SPR), and A. Schipke, S. Chen and L. Zhang (Resident Representatives). M. Rodlauer (APD) joined the concluding meetings and FDMD D. Lipton the high-level meetings on May 28–29. Z. Jin, P. Sun and Y. Liu (all OED) joined the official meetings. D. Wong coordinated media activities. G. Alvim, K. Chow, L. Tolentino, J. Zhang, Q. Shan, and J. Li supported the mission.
Contents
CONTEXT: AN HISTORIC JUNCTURE
RECENT DEVELOPMENTS: STRONGER GROWTH, SLOWER REBALANCING
POLICIES: RESOLVING POLICY TENSIONS TO DELIVER HIGH-QUALITY GROWTH
A. Continuing to Rein in Credit Growth
B. Accelerating Rebalancing Efforts
C. Increasing the Role of Market Forces
D. Fostering Openness
E. Modernizing Policy Frameworks
OUTLOOK AND RISKS
STAFF APPRAISAL
BOX
1. Credit Efficiency: Recent Development and Outlook
FIGURES
1. Recent Developments and Outlook: Solid Growth Momentum
2. Rebalancing: Uneven Progress
3. Credit: Credit Gap Narrows but Remains Large
4. Monetary: Money Market Rates Rose
5. Fiscal: Continued Loosening in 2017
6: External: Outflow Pressure Abated
7. Banking: Sharp Slowdown in Asset Growth
8. Financial: Tighter Financial Conditions
9. Cross-Country Comparison on FDI Regulatory Restrictiveness
TABLES
1. Selected Economic Indicators
2. Balance of Payments
3. External Vulnerability Indicators
4. Monetary and Credit Developments
5. General Government Fiscal Data
6. Non-financial Sector Debt
7. Rebalancing Scorecard
8. SOE Performance
APPENDICES
I. External Sector Report
II. Risk Assessment Matrix
III. Implementation of Main Recommendations of the 2017 Article IV Consultation
IV. Implementation of Main Recommendations from the 2017 FSAP
V. Debt Sustainability Analysis
VI. Assessment of the Authorities’ Approach to Managing Capital Flows
Front Matter Page
PEOPLE’S REPUBLIC OF CHINA
STAFF REPORT FOR THE 2018 ARTICLE IV CONSULTATION—INFORMATIONAL ANNEX
June 28, 2018
Prepared By
Asia and Pacific Department (In consultation with other departments)
Contents
FUND RELATIONS
WORLD BANK-IMF COLLABORATION
RELATIONS WITH THE ASIAN DEVELOPMENT BANK
STATISTICAL ISSUES
CAPACITY DEVELOPMENT AND TECHNICAL ASSISTANCE
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Press Release No. 18/310
FOR IMMEDIATE RELEASE
July 26, 2018
International Monetary Fund
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Washington, D. C. 20431 USA
