THE IMF ON CHINA

CHINA'S GDP MAY HALVE ON EURO DEBT CRISIS, SAYS IMF

The Economic Times, February 7, 2012

BEIJING/SHANGHAI: China's economic expansion would be cut almost in half if Europe's debt crisis worsens, a scenario that would warrant "significant" fiscal stimulus from the nation's government, the International Monetary Fund (IMF) said. Based on the IMF's "downside" forecast for the global economy, China's growth could drop by as much as 4% points from the fund's current projection, which is for 8.2% this year, the organisation said in a report released on Monday by its China office in Beijing.

The outlook expands on the IMF's warning last month that the world could plunge into another recession if Europe's woes deepen. Premier Wen Jiabao reiterated last week his government will "fine-tune" policies to support growth amid the region's debt crisis and the cooling domestic property market.

"China's growth rate would drop abruptly if the euro area experiences a sharp recession," the Washington-based IMF said. "However, a track record of fiscal discipline has given China ample room to respond to such an external shock." The government should cushion the impact of a deeper slowdown with measures including tax cuts that amount to about 3% of gross domestic product, it said.

China's economy is unlikely to experience a "hard landing" and the nation has room to boost fiscal spending, Anoop Singh, director of the IMF's Asia-Pacific department, said. China should strengthen domestic consumption, he said

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