WASHINGTON/BEIJING • The International Monetary Fund (IMF) raised its growth estimate for China for the second time this year, while also cautioning that deep reforms are still needed to break away from debt-fuelled expansion.
The world's second-largest economy will expand by 6.7 per cent this year, the fund said in its annual report on Article IV consultations published yesterday.
That is up from a 6.6 per cent estimate in the economic outlook released in April and 6.5 per cent forecast in January.
It is unusual for the IMF to update forecasts outside of its scheduled global economic outlook series, though officials have signalled that a strong first quarter had not fully been reflected in earlier releases.
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IMF first deputy managing director David Lipton said in a statement yesterday that China should use its current momentum to push reforms through.
"While some near-term risks have receded, reform progress needs to accelerate to secure medium-term stability and address the risk that the current trajectory of the economy could eventually lead to a sharp adjustment," Mr Lipton said in Beijing, after meetings with top policymakers.
"It is critical to start now while growth is strong and buffers are sufficient to ease the transition."
China has proved doubters wrong this year with the first back- to-back growth acceleration in seven years in the first quarter, though economists project slower expansion in the second half, while still meeting the government's 6.5 per cent full-year growth objective.
Policymakers have also been clamping down on frothy property markets with new curbs, which was reflected in data yesterday showing property development investment has slowed down.
China's economy has long been driven by debt-fuelled investment in infrastructure, such as bridges, highways and hydro-electric dams, as well as real estate.
But years of freewheeling credit have left it with huge amounts of debt that some fear could trigger a financial crisis, prompting the authorities to rein in risky lending and property acquisitions.
Signs emerged that China's measures to cool the property market are having some effect, as fixed-asset investment expanded slower than expected at 8.6 per cent in the first five months.
Retail sales and industrial output remained resilient last month, with the former increasing 10.7 per cent and the latter 6.5 per cent from a year earlier.