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China's Economic Slowdown Is Deliberate and Healthy, According to the IMF

(Credit: Lam Yik Fei/Getty Images) DONGGUAN, CHINA - JANUARY 26: People walk on street outside of a shoe shopping mall at Houjie town on January 26, 2016 in Dongguan, China. China's slowing economy and falling stock market have caused concerns for investors worldwide and many factories in manufacturing hub such as Dongguan have either closed down or reduced its number of staff. Official data reported its annual growth of 6.9 percent in 2015, the slowest pace in 25 years, and stock markets continue to plunge since the new year.
Economy Slows Down In Fading Factory Town
February 25
4:14 AM 2016

The IMF managing director Christine Lagarde stated that the world economy is going through a tepid recovery as the IMF expected the global economic growth to grow by at least 3 percent this year. Furthermore, Lagarde also believes that China's economic slowdown will not lead to a hard landing.

Last month, the IMF lowered its global economic growth forecast to 3.4 percent this year and 3.6 percent for 2017. A large factor to this lowered expectation is the Chinese economic slowdown. Also contributing factors are lower commodity prices and strains in large emerging market economies, as noted by The National.

Lagarde was speaking at the Global Women's Forum 2016 in Dubai regarding the global economic growth, especially addressing China's economic climate. The forum addressed China's policy of transition from an export-led to a consumer-led economy, as noted by Lagarde in her statement. The shift is believed to have created the country's economic slowdown, whereas the IMF projected the growth will be 6.3 percent this year and 6 percent in 2017.

However, Lagarde uttered the IMF's view on the slowdown and referred to it as a deliberate transition. "We, the IMF, don't believe China is going to have a hard landing. We see it as a deliberate transition. It is also a big transitional business model essentially moving from heavy manufacturing to lighter manufacturing and a lot of more services, moving from investing to much more consuming and being a bit less predominately export-driven," she stated. It's also noted that China's new growth model has an impact on the import of raw materials, especially minerals.

According to Xinhuanet, Lagarde also mentioned China's new mechanism of exchange rates with a new approach to governance. She sees it as a correct step that could bring growth in the long term. "If you combine these massive transitions we move in China from double-digit growth about five-six years ago to something that we see probably at 6.3 percent and probably to 6.0 percent next year."

AfricaNews reported that Lagarde also talked about other emerging markets and further projections. "The other emerging market economies are either slowing deliberately, like China or in a pretty weak position, whether it's Russia, whether it's Brazil, whether it's South Africa; those countries are struggling and both Russia and Brazil will be in a negative territory this year," Lagarde said.

Despite the prolonged economic slowdown in China, the IMF believes that the world's second-largest economy is on the right path. The economic transitions would, in turn, contribute to the country's economic growth, as stated by the newly-elected IMF managing director Christine Lagarde. 

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