The International Monetary Fund on Wednesday revised upward its forecast for China's 2011 economic growth to 9.9% just three months after it had forecast 9.7% growth, and suggested Beijing could use exchange rate appreciation to deal with excess demand pressures.
The International Monetary Fund on Wednesday revised upward its forecast
for
China
's
2011 economic growth to 9.9% just three months after it had forecast 9.7%
growth, and suggested
Beijing
could
use exchange rate appreciation to deal with excess demand pressures.
While the IMF didn't specifically mention the yuan exchange rate in its latest
World Economic Outlook, it indicated that
China
could
also lead the way for other emerging economies if it adjusts its currency
policy.
The IMF's upward revision of its forecast for
China
's
2011 gross domestic product growth shows it doesn't expect the pace of
China
's
economic expansion to slow much from the 10% it is predicting for this year. It
comes as overheating risks are rising in the world's third-largest economy even
as
Beijing
has
begun to gradually wind down the extraordinary stimulus program introduced in
late 2008.
Economists have urged
China
to
allow the yuan to strengthen much faster to help counter building inflationary
pressures--some of it imported due to rising commodities prices on the
international market--and temper the risk of domestic asset bubbles worsening.
But
China
is
steadfast against outsiders pressuring it about its currency policy. There is
persistent market expectations that
Beijing
is
planning to exit the yuan's effective peg to the dollar, which has been in
place since July 2008 to deal with the impact of the global financial crisis.
"In economies with excessive current account surpluses and solid public
finances, fiscal exit can wait while excess demand pressures are being
addressed by reining in credit growth and allowing exchange rate appreciation. This
is essential for
China
,
given its large role in the global market," the IMF said in its
semi-annual World Economic Outlook.
"Greater currency adjustment in
Asia
would
facilitate adjustment in other emerging economies that may fear losing market
share if their currencies were to appreciate alone," the IMF said.
China
's
withdrawal of its "exceptional monetary stimulus...will also minimize the
risks from excessively easy credit conditions," it said.
Wednesday's report maintained the IMF's forecast for
China
's
2010 GDP growth, which was revised upward in January from an October projection
of 9%.
Although it is common for the fund to sharply revise its economic projections
in regular updates, its 2010 GDP growth forecast for
China
puts
the IMF ahead of the Asian Development Bank's 9.6% and the World Bank's 9.5%
growth estimates.
Beijing
is officially targeting
growth of around 8% for this year. In the first quarter,
China
's GDP
grew 11.9% from a year earlier, its fastest pace since the onset of the global
financial crisis.
The IMF also raised its inflation forecast for
China
, as
measured by the growth in the consumer price index, to 3.1% for this year, up
from its October projection for 0.6%, which puts its forecast in line with the
Chinese government's target of keeping CPI growth around 3% for 2010.
China
's CPI
growth will likely slow to 2.4% in 2011, the IMF said.
China
's
current account surplus as a percentage of GDP will likely be 6.2% this year
and rise a tad to 6.5% in 2011, the fund said, after hitting 5.8% in 2009.
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