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China has room for stimulus: IMF

business Updated: Jan 31, 2012 09:14 IST

AFP
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China could easily boost domestic consumption to stimulate its economy if its slowdown is too sharp, the International Monetary Fund said on Monday.

IMF representative for Asia Anoop Singh said Europe's plunge into recessionary conditions could pose a challenge for Beijing keeps its growth steady.

"We don't see a hard landing as a likely event in China," he said.

But, he added, "There are clear risks, in particular an escalation of European events."

"There is room for fiscal stimulus if downside risks materialize."

Generally in Asia, Singh said, governments still have the fiscal cushions to be able to intervene to help their economies without large fiscal risks.

"The pace of consolidation could certainly be slowed in many economies which have relatively low levels of public debt, such as China of course."

Beijing, he added, already has clear, established tools to counter too-slow growth by boosting domestic consumption -- as opposed to past reliance on investment to drive growth.

"I think that it's the major stimulus that they could bring forward if the external events warranted it."

Despite a still-quick pace of growth, China's economy has shown some weaknesses in recent months.

On January 20 a key index of manufacturing activity, HSBC's preliminary purchasing managers' index, contracted for the third straight month.

The IMF reduced its forecast for Chinese economic growth last week to 8.2% in 2012, down from the 9.0% it forecast just three months earlier.