From the Financial Times (link)
The International Monetary Fund on Tuesday warned China of the dangers of over-investment in sectors such as construction and property and recommended further monetary tightening following the small rise in interest rates imposed by the central bank last week.
Wanda Tseng, deputy director of the IMF’s Asia and Pacific department, praised the Chinese authorities for reacting “relatively early” to the problem but described the rate increases – which included a rise of 27 basis points to 5.85 per cent for the one-year benchmark rate – as “very small” and “probably just symbolic”.
Following the Hong Kong launch of the IMF’s latest and generally upbeat Regional Economic Outlook, Ms Tseng told the Financial Times that the fund was worried about the emergence of new non-performing loans as Chinese banks became less restrained and recycled the country’s abundant domestic liquidity into potentially unprofitable projects.
