IMF advises China to orient its economy towards services to correct overcapacity

The managing director of International Economic Fund (IMF), Kristalina Georgievarecognized this Thursday that China has excess capacity in some of its sectors and recommended the Asian giant orient its economy towards services.

“We recognize that over the years there have been sectors in the Chinese economy aware of the existence of excess capacity“, he pointed out Georgieva in a speech at the Atlantic Council think tank.

For this reason, he added, it is “fundamental“that the Asian giant develops its internal demand and that”orient a greater part of the economy towards services, so that this stops being a problem for China”he added.

The Fund explained Georgievais analyzing the Chinese economy “in great detail“in order to provide you”Good advices” to the country led by Xi Jinping.

“If China makes the reforms we recommend, it can obtain enormous benefits, it can increase its production by almost 20% in the coming years”, noted the director of the institution.

Georgieva thus responded to a question regarding the criticism of Beijing launched by the United States and the European Union, which affirm that the Chinese Government’s direct support for certain sectors is causing excess industrial capacity in some sectors such as renewable energies and that this affects negatively to the global economy.

In fact, last week the United States Secretary of the Treasury, Janet Yellen, showed her concern in a visit to Beijing in which she criticized that Chinese official support for some industries causes a “production overcapacity that significantly exceeds China’s domestic demand as well as what the world market can support”, he noted in a statement.

In the opinion of GeorgievaChina needs “boost domestic demand” and they can do it “addressing pensions, strengthening social safety nets” and health services, for example.

“China is important for the Chinese people but also for Asia and the world. They contribute a third of global growth this year and when China drops one percentage point in growth the rest of Asia drops 0.3%“, estimated the Bulgarian.

Next week, the IMF and the World Bank will hold their spring meetings, at which an update on global growth figures will be presented, including those of the Asian giant.