IMF Economists Call for Greater Effort to Rebalance China's Economy

Economists from the International Monetary Fund say the current financial turmoil in advanced economies should prompt China to rebalance its economy to secure sustainable growth.

IMF economists made the remarks at a seminar in Beijing, explaining the agency's recent World Economic Outlook.

Wu Jia has the details.

In its latest World Economic Outlook, the International Monetary Fund said the global economy is in a dangerous new phase with growing risks of a downturn.

The agency predicted that real GDP in the advanced economies would expand at an anemic pace of about 1.5 percent this year and 2 percent next year.

IMF's Senior Resident Representative for China IL Houng Lee says this sluggish growth poses challenges.

"Emerging and developing countries' consumption in the share of total global GDP is not really picking up. So if there is no rebalancing and there is no growth coming from advanced countries, their growth over the medium term will remain low."

The IMF has lowered its growth forecast for emerging economies to about 6 percent in 2012, as they suffer from declining demand from developed economies.

For the same reason, the agency has cut China's 2012 growth to 9 percent from a previous forecast of 9.5 percent.

Murtaza Syed, an IMF expert on the Chinese economy, explains.

"In our previous projections, we had net exports contributing 1.1 percentage points to growth in 2012. We have now marked that down to 0.7. That's 0.4 percentage points reduction. And that matches more or less with what we've done to our growth forecast for China."

Syed points out that the world's second largest economy should rebalance its economy to secure long-term growth.

"Rebalancing the economy involves many different reforms in China. It's not just about the social safety net. It's also about developing the financial system. Rebalancing is also about improving household incomes. And there are many ways of doing this and will take some time."

China has been intensifying efforts to change its decades of export-led growth model since the outbreak of the international economic crisis in 2008.

The country's trade surplus narrowed in August as imports jumped sharply, suggesting domestic demand has become a bright spot for the Chinese economy.

For CRI, I'm Wu Jia.