On July 31, 2006, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with the People's Republic of China.
Background
China's output growth continues to be strong. Based on the revised official data, GDP growth in 2005 reached 10 percent, roughly the same as in the previous year. Indicators for the major components of demand suggest that output growth could have been much higher than officially estimated in 2005.
Economic activity maintained its momentum in the first quarter of 2006, with further evidence of acceleration in investment. GDP grew by 10¼ percent (year-on-year) in the first quarter. Total nominal fixed investment increased from 25.7 percent in 2005 to 29.8 percent in the fist half of 2006.
Net exports continued to be strong, although the pace of import growth has accelerated. Indicators also suggest that consumption remained robust. Despite strong growth, inflation remains subdued.
After peaking at 5¼ percent (year-on-year) in mid-2004, headline CPI inflation fell to 1¾ percent in 2005 and 1½ percent by May 2006, largely driven by a significant moderation of food price inflation.
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Directors welcomed improvements in economic statistics, including in the national income accounts and the international investment position.
Looking ahead, they viewed the publication of annual and quarterly real GDP on an expenditure basis and further improvements in some aspects of balance of payments statistics as key priorities, and urged the authorities to continue to make use of the IMF's technical assistance in these areas.
Directors welcomed China's provision of financial support and debt relief to many low-income countries.
Directors encouraged the authorities to share information on these activities with the IMF, to participate fully in the Heavily Indebted Poor Countries initiatives, and to make their lending activities consistent with the low-income country debt sustainability framework.
International Monetary Fund
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