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IMF: bursting Chinese bubble 'no reason to lose confidence'

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The International Monetary Fund said on Thursday that there was no reason to lose faith in China's economy because of the bursting stock market bubble.

[WASHINGTON] The International Monetary Fund said on Thursday that there was no reason to lose faith in China's economy because of the bursting stock market bubble.

IMF chief economist Olivier Blanchard said that the 30 per cent meltdown in the Shanghai and Shenzhen markets since mid-June is "very much a sideshow" to the greater economy and would not undermine growth overall.

"There is no particular reason to have lost confidence," because of meltdown, he said in a press conference.

The spillover of the market rout into the economy is "likely to be small", he said, as the IMF reiterated its forecast for 6.8 per cent growth in the world's second-largest economy this year.

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The market "went up very quickly, it's coming down very quickly... Chinese people should be used to very wild gyrations in stock markets," he noted adding that it "won't be the last time."

He said Beijing should not try to prop up markets, but said their efforts to ease the pace of the plunge in stocks "may be a good thing." "The government should realize that they cannot achieve some level of stock prices that they want," he said.

AFP

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