China's economic slowdown and a spiky fall in its stock market herald not a crisis but a "necessary" modification for the world's 2nd largest economy. New evidence of easing growth in China hammered global cues from Friday and continued today, driving Wall Street to its steepest one-day drop in nearly four years. Monetary policies have been very expansive in recent years and an adjustment is necessary, it's totally premature to speak of a crisis in China.
The IMF projections for a 6.8% expansion in the Chinese economy this year, below the7.4 % growth achieved in 2014. China's real economy is slowing but it's perfectly natural that this should happen, what happened in recent days is a shock on financial markets which is natural. China's stock markets have fallen more than 30% since mid-year. Following a slew of poor economic data, Beijing devalued the yuan in a surprise move last week.
The IMF would discuss in coming months with Chinese authorities their decision to weaken the currency. China is eager for the yuan to join the IMF's Special Drawing Rights basket of currencies. But the fund is considering extending the current SDR basket by nine months until September 30, 2016. Turning to Greece, which is heading to an early election in September, the IMF would decide in two or three months whether to join the latest international rescue efforts. The IMF deems Greece's debt unsustainable and has called for debt relief as a condition to participate in a third bailout. The debt sustainability assessment will take place after the launch of the programme (agreed with creditors) in two or three months. The IMF will then be able to evaluate whether to intervene.
