May 31, 2013 (TSR) – An International Monetary Fund (IMF) chief said on Wednesday that Chinese government debt has risen to nearly 50 percent of the country’s gross domestic product (GDP) but is still under control.
Speaking at a press briefing after the completion of an annual review of the Chinese economy by the organization, David Lipton, the IMF’s first deputy managing director, said, “Reining in total social financing growth is a priority and will require further tightening of prudential oversight as well as, critically, improved investor accountability for their investment decisions.”
The IMF concluded in its review that it is important to reduce the deficit in the medium term to ensure a robust and sustainable debt profile, while stressing that part of the fiscal deficit is financed through land sales, and augmented debt is still at a manageable level.
Xiang Huaicheng, China’s former commerce minister, said in April that the country’s general government debt exceeded 30 trillion yuan (4.85 trillion U.S. dollars), or 37.8 percent of GDP by the end of 2011, while it stood at about 40 percent of GDP in 2012.
Mao Zhenhua, director of the Economic Research Institute at Renmin University, said on Tuesday that local government debt is still under control but there needs to be thorough reform in the local liability system.
The Chinese economy is expected to grow by around 7.75 percent this year despite weak and uncertain global conditions, the IMF said.
China’s Premier Li Keqiang said on Wednesday that the key to maintaining the country’s stable and robust economic growth is building up and the service industry.
An IMF team visited China from May 25 to 29 to conduct the annual Article IV review of the Chinese economy. The team held discussions with senior officials from the government, the central bank, financial regulators, private sector representatives and academics to exchange views on the economy and the challenges ahead.