RTTNews - China's rapid and vigorous policy response helped the country to mitigate the economic downturn and facilitate an economic recovery during the course of this year and into 2010, the International Monetary Fund or IMF said Wednesday.

After concluding its Article IV consultation with the People's Republic of China, the Executive Board of the IMF said China has been hit hard by the global economic crisis, a slowdown in the real estate market, and the overhang caused by excess capacity in various industries. Exports have fallen dramatically and growth is now at its lowest point in more than a decade.

The Chinese government has responded with decisive monetary and fiscal policies, offsetting the drag from declining world demand and falling private investment. Monetary policy has also been loosened.

However, IMF officials urged China to take more reforms as demand continued to remain sluggish. They recognized that the uncertain pace and timing of the global recovery would make it much harder for global demand to absorb increased production capacity from China.

They, therefore, supported the steps that China is taking to bolster private consumption and saw further room for policies to reduce China's dependence on exports and high levels of investment.

Given the low level of public debt, the IMF said China has further room for a targeted, additional stimulus aimed at increasing private consumption through near-term fiscal measures to raise household income. Fiscal support should be maintained in 2010, it asserted.

IMF officials agreed that monetary expansion would need to begin once the economic recovery is firmly established. The Washington-based IMF forecast China to grow 7.5% in 2009 after a 9% growth in 2008. The unemployment rate is expected to rise to 4.4% this year from 4.1% as a collapse in trade expelled jobs in export-oriented sector.

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