IMF warns of China economic risks despite Covid rebound

China's economic growth remains unbalanced and financial risks need to be addressed, the IMF said, tempering its optimism over the country's strong rebound from the Covid-19 outbreak early last year.

China's economy expanded by an estimated 1.9pc last year and is likely to grow by another 7.9pc in 2021, the IMF said in its regular country review.

The projected figure for 2020 would make China the only major world economy to avoid a contraction in the period, as the Covid-19 pandemic triggers the worst global slump since World War 2.

The Chinese economy is likely to rebound strongly this year as activity normalises and outbreaks remain under control, although the 7.9pc projection is down slightly from 8.2pc in the IMF's October World Economic Outlook report, reflecting a reassessment of the amount of fiscal support provided.

But the IMF continues to express concerns about the lack of balance in the Chinese economy. "China is recovering fast, ahead of most large economies, but the recovery is still unbalanced and facing significant downside risks," the IMF's China mission chief Helge Berger said.

The economic recovery has been driven mainly by government spending, while consumption remains low and lagging its pre-crisis trend.

China has made progress on delivering structural reforms despite the pandemic, but these have focused largely on opening financial services to international investment. Measures focused on the "real-sector" economy, especially reforms to state-owned enterprises and attempts to create a level playing field with private-sector firms, have been slow.

Beijing should also move to address financial vulnerabilities to maintain stability, with policies to address problem loans and to strengthen regulation introduced as the economic recovery takes hold, the IMF said.

Chinese economic growth is crucial to demand for a swathe of commodities. China's crude imports rose by 9.2pc from a year earlier to 11.03mn b/d in January-November, according to customs data, helping mitigate a global slowdown in demand. China's oil consumption is on course to expand by over 700,000 b/d to 15.2mn b/d this year, Argus Consulting Services predicts.

By Kevin Foster