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China has reached soft landing: IMF

China has achieved a ‘soft landing’ in its economic slowdown, the International Monetary Fund (IMF) said while cautioning that more sweeping reforms are needed to ensure healthy growth in the longer term.

In a report on Wednesday on its web site, the IMF praised China's leaders for adjusting policies to help counter the malaise plaguing the global economy that has also slowed robust growth in China and other emerging nations.

‘China's economy seems to be undergoing a soft landing, though global headwinds are increasing,’ said the report, issued after IMF consultations with Beijing.

It notes that China has reduced some imbalances in the world's second-biggest economy, such as its once huge trade surplus, and brought inflation under control. But it pointed to risks from excessive bank lending and urged more effective regulation to ensure financial stability.

‘Overall we are very confident that China is experiencing what we would call a soft landing,’ Markus Rodlauer, deputy director of the IMF's Asia and Pacific department, said in a video interview.

‘This means growth of about 8 per cent. This is less than it was in the past but still it compares very favorably to what is happening around us,’ he said.

China's second-quarter growth fell to a three-year low of 7.6 per cent as exports, consumer spending and factory output weakened. Analysts say a rebound might begin in the second half but could take longer to take root and be weaker than previously expected.

That has dampened hopes it might make up for weak Western demand and drive global growth. Just a week earlier, the IMF had cut its 2012 growth forecast for China's economy by 0.2 percentage point to 8 per cent and said a ‘hard landing’ was still possible.

It forecasts growth in 2013 of 8.5 per cent.

Preliminary results of a monthly survey of Chinese manufacturers released yesterday showed the contraction in manufacturing eased in July. HSBC's Purchasing Managers' Index rose to 49.5 from 48.2.
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