WASHINGTON — The International Monetary Fund (IMF) said on July 9 that there is no reason to lose confidence in the Chinese economy in view of the big stock market movements.
“If you look at things beyond what happened in the stock market, there is no particular reason to have lost confidence (in the real economy),” the IMF chief economist Olivier Blanchard said at a press conference on July 9.
China’s stock markets had increased by 150 percent in less than a year to peak in mid-June of this year, but lost more than 30 percent since then. Blanchard considered the sharp decline as “very much a side show” to the overall economy.
Adjustments in China’s real economy are rather “healthy” and desirable, with credit growth and the adjustment of real estate investment under control, said the chief economist.
In regard to Chinese government’s measures to stabilize the market, Blanchard said the intervention to slow down the decrease might actually be appropriate.
The spillover of the market movements into the economy is “ likely to be small”, he said, as the IMF maintained its forecast for 6.8 percent growth in the world’s second-largest economy this year.
When asked about how China’s stock market movements and Greece issue will affect the US Federal Reserve’s interest rate hike decision, Blanchard said “the Fed has more or less the same interpretation of the implications of the events in Greece and China as we do, which is that they are not of major importance for the US at this point, so it should not affect their choices in terms of monetary policy very much.”