| WASHINGTON, April 12
WASHINGTON, April 12 A senior Chinese official
hit back on Saturday at International Monetary Fund warnings
that China's economy faced the danger of a hard landing due to
poor asset quality, saying the government was taking action to
deal with financial risk.
Chinese Vice Finance Minister Zhu Guangyao said China worked
closely with the IMF but did not agree with all of its analysis.
"In general, we think they are a very professional financial
institution, but some of the methodology used and some
traditional thinking, they also need reform," he told a small
group of Western journalists on the sidelines of the IMF and
World Bank spring meetings in Washington.
"We hope that their analysis and methodology can really
reflect a country's reality," he said. "We said not just to the
IMF, but also to the World Bank, that not one size fits all. If
your policy suggestion is (to be) a valuable suggestion, you
must base it on reality."
IMF Managing Director Christine Lagarde warned of the risk
of what she termed a "hard landing" in China, the world's
second-largest economy, and negative repercussions on other
emerging markets in her Global Policy Agenda released at the
start of the meetings in Washington on Thursday.
While her report said the risk was small, it urged China to
rein in risks in its shadow banking system and liberalize its
financial sector to improve the allocation of credit.
Zhu said Chinese President Xi Jinping had publicly
recognized that China faced a challenge over the issue of shadow
"We are beginning to take action, including strengthening
management, monitoring and supervision," he said, adding that he
believed China had handled the situation well, having drawn
lessons from the 2008 collapse of Lehman Brothers.
"Compared with how the U.S. and the Europeans handled Lehman
Brothers and the sovereign debt issue, we think that China is
the most successful - so far!" he said.
'PICTURE IS VERY CLEAR'
Zhu said state-owned investment companies known as
local-government financing vehicles were already nationally
audited to clarify what was government debt and what was
"The picture is very clear," he said. "Now we are facing the
challenge, strengthening the management on the local government
financing vehicle issue."
Zhu echoed other policymakers in describing a recent decline
in the Chinese yuan, or renminbi, against the dollar as a result
of market forces and said it was not a one-way phenomenon.
"We hope that with the change of supply and demand, the
renminbi exchange rate can fluctuate up or down," he said.
The weakening of the yuan prompted worries in Washington
that China's resolve to let market forces guide its currency was
In her report, Lagarde offered a different view. "I took the
recent increase of the band of the renminbi as the move in the
direction of internationalization. I won't characterize it as an
intended depreciation of the currency," she said.
Overall, Lagarde's report urged countries to do more to
Beijing's economy has been slowing, but it has been at pains
to play down market speculation that it might launch a large
stimulus package, saying instead that it would fine-tune
policies to ensure unemployment did not rise.
On Thursday, Yi Gang, a vice governor of the People's Bank
of China, said in Washington that China's government and central
bank should be "very cautious" in implementing any stimulus
programs because they tended to be less efficient than natural
market forces in boosting growth.
Zhu said China had recognized the need to change the speed
of growth and added that a four-trillion-yuan stimulus package
launched in 2008 had worsened the country's environmental
problems, which needed to be dealt with.
He said that after the years of fast growth, key priorities
were to create jobs and improve living conditions. He said the
government was addressing such issues by providing tax relief
for small business and investing in housing and rural railways.
Zhu rejected the views of some analysts who link a
government anti-corruption drive with the economic slowdown.
"We think anti-corruption is a very important job," he said.
It's a fundamental principle for any government that it must be
a clean government. They must serve the people."
(Reporting by David Brunnstrom; Editing by Paul Simao)