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Chinese economic growth at risk from European downturn | Chinese economic growth at risk from European downturn |
(40 minutes later) | |
A sharp downturn in Europe could cut China's economic growth rate nearly in half, the International Monetary Fund said on Monday, adding to warnings about a possible severe global slowdown this year. | A sharp downturn in Europe could cut China's economic growth rate nearly in half, the International Monetary Fund said on Monday, adding to warnings about a possible severe global slowdown this year. |
The IMF said Beijing should be ready to launch a multibillion-dollar stimulus to ward off a slump in the world's second-largest economy. | The IMF said Beijing should be ready to launch a multibillion-dollar stimulus to ward off a slump in the world's second-largest economy. |
The IMF is forecasting 8.2% growth this year for China but said that could be reduced by up to four percentage points if Europe's crisis causes large declines in credit and output. | |
"The global recovery is threatened by intensifying strains in the euro area and fragilities elsewhere," it said. "In the unfortunate event such a downside scenario becomes reality, China should respond with a significant fiscal package, executed through central and local government budgets." | "The global recovery is threatened by intensifying strains in the euro area and fragilities elsewhere," it said. "In the unfortunate event such a downside scenario becomes reality, China should respond with a significant fiscal package, executed through central and local government budgets." |
China rebounded quickly from the 2008 global crisis and its economy expanded by a healthy 9.2% last year but growth has declined as Beijing tightened credit and investment curbs to prevent overheating. | China rebounded quickly from the 2008 global crisis and its economy expanded by a healthy 9.2% last year but growth has declined as Beijing tightened credit and investment curbs to prevent overheating. |
China's leaders have responded to a plunge in global demand, promising bank lending and other aid to struggling entrepreneurs. The government warned last month it faced "complexity and challenges" due to global malaise. | |
The World Bank – the IMF's sibling organisation – told China and other developing countries last month they should prepare for a global slump that it warned might hit them harder than the 2008 economic crisis. | The World Bank – the IMF's sibling organisation – told China and other developing countries last month they should prepare for a global slump that it warned might hit them harder than the 2008 economic crisis. |
The IMF said its "global downside scenario" envisaged bigger-than-expected losses to banks on private sector lending and sovereign debt, a contraction in investment and slower global economic activity. | The IMF said its "global downside scenario" envisaged bigger-than-expected losses to banks on private sector lending and sovereign debt, a contraction in investment and slower global economic activity. |
The IMF said a stimulus equal to about 3% of China's annual economic output spread over 2012-13 would limit the decline in Chinese growth to about one percentage point. That would be about 460bn yuan (£48bn). | |
China's banks might be shielded by barriers that keep its financial system sealed off from global capital flows, the IMF said. But it said a sharp fall in western stock markets might disrupt trade credit. | China's banks might be shielded by barriers that keep its financial system sealed off from global capital flows, the IMF said. But it said a sharp fall in western stock markets might disrupt trade credit. |
The government of Hong Kong, a Chinese territory with its own financial system, announced last week it will spend 80bn Hong Kong dollars (£6.5bn) this year on stimulus measures. | The government of Hong Kong, a Chinese territory with its own financial system, announced last week it will spend 80bn Hong Kong dollars (£6.5bn) this year on stimulus measures. |
Citing anaemic trade, it said the Hong Kong economy could grow by as little as 1% this year after slowing to 3% in the final quarter of 2011. | Citing anaemic trade, it said the Hong Kong economy could grow by as little as 1% this year after slowing to 3% in the final quarter of 2011. |
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