IMPAIRMENT European economy can dramatically reduce the nearly half the growth rate in China, said the International Monetary Fund (IMF) yesterday, adding to the warning about the possibility of a severe global downturn this year. IMF said Beijing should be prepared to implement the multi-billion dollar stimulus package to stem the deterioration the second largest economy in the world.
The world body forecast 8.2 percent growth this year to China, but said it was likely to be reduced to four per cent if the European crisis led to a decrease in credit and large production.
"Global recovery threatened by uncertainty in the euro area and elsewhere," he said. "If the decline scenario becomes a reality, China should react with a large fiscal package, which is implemented through local and central government budgets," he added. China recovered faster than the global crisis in 2008 and its economy grew strongly at a rate of 9.2 percent last year, but growth rates slowed when Beijing tightened credit and reduced investment activity. leaders of China to respond to falling global demand with the promise of bank loans and other assistance to help entrepreneurs . Government of that country warned last month that it faced the complexities and challenges of global uncertainties. World Bank last month told the China and other developing countries to be prepared with a recalled the global downturn is worse than the economic crisis of 2008. IMF said the global downturn scenario recalled will see more serious loss for the bank from lending to private sector and sovereign debt, the contraction in investment and a slowdown in global economic activity. the world body said the stimulus package equivalent to about three per cent of China's Gross Domestic Product for 2012 - 13 will limit the decline in China's economic growth to about one percentage point. It will involve about 460 billion yuan (U.S. $ 75 billion). Bank of China may be protected by barriers that close the financial system of global capital flows, according to IMF. But he said the sharp decline in Western stock markets may affect trade credit. The Hong Kong government last week announced it will spend 80 billion Hong Kong dollars (U.S. $ 10.3 billion) this year for the stimulus measures.