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IMF hails China's response in financial crisis

07-28-2010 15:57 BJT

WASHINGTON, July 27 (Xinhua) -- Chinese authorities have taken "quick, determined and effective" measures to help its economy regain momentum against the worst financial turmoil in decades, said the International Monetary Fund (IMF) on Tuesday.

"Executive Directors commended China's proactive and decisive policy response to the global economic crisis," the IMF Executive Board said in its annual report on China's economic policy assessments and recommendations after consultation with Chinese authorities.

"The authorities' quick, determined, and effective policy response has helped mitigate the impact on the economy and ensured that China has led the global recovery."

SOUND POLICY RESPONSE

The report said China's fiscal stimulus package adopted in the crisis has increased expenditure on public infrastructure, pensions, health care as well as education, and lowered taxes and incentives to boost purchases of consumer durables.

On monetary policy, it noted China's central bank lowered interest rates and reserve requirements, and removed limits on credit growth, which led to an extraordinary surge in bank lending.

In late 2008, China unveiled a four-trillion-yuan (590 billion U.S. dollars) stimulus package and shifted its fiscal policy from a "prudent" to a "proactive" stance and eased monetary policy from "tight" to "moderately loose," to counter the global financial crisis.

"These policies were instrumental in arresting the downward momentum to both activity and confidence," said the report, noting that China's economic growth began to pick up in the second quarter of 2009 and reached an average for the year of 9.1 percent. It expected China's economy to remain robust against the backdrop of a still-fragile global economic recovery.

China, the world's third largest economy, expanded at a 10.3-percent year-on-year rate in the second quarter this year, slower than the previous two quarters. But the cooling down is considered good for economic restructuring and preventing overheating.

BENEFIT WORLD ECONOMY

China's solid economic recovery also benefited other countries by driving up the sluggish global demand.

The report said China's recovery has "significant positive spillovers" to the region and the world economy as a whole, both through increased demand for commodities and through higher imports of capital goods.

China's recovery has driven up its demand for big-item commodities such as crude oil, metals and agricultural products, which contributed to a surge in global commodity prices. On the other hand, economic recovery boosted the country's demand for imported goods, resulting in a quick decline in its current account surpluses.

China's trade surplus fell by 42.5 percent in the first six months this year from a year earlier to 55.3 billion U.S. dollars, according to the General Administration of Customs (GAC).

Economists projected that China's trade surplus this year would decline by around 20 billion dollars from the 2009 level.


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