Structural transformation and labor productivity growth are key to China’s economic growth, Deputy Managing Director of the International Monetary Fund (IMF) Zhu Min said here on Thursday, ahead of the World Bank Group-IMF’s annual meetings on Oct.9-11. The IMF recently downgraded its forecast for global economic growth this year to 3.1 per cent, lower than its forecasts of 3.3 per cent and 3.5 per cent in July and in April respectively. However, it forecast China’s gross domestic product (GDP) growth will remain steady at 6.8 per cent in 2015, reports Xinhua. China faces a process of rebalancing as it steadily adjusts its economic structure, moving away from an investment and export-driven economy to a service and domestic demand-led model of economic development, Zhu told Xinhua. The service sector in China outperformed the industrial sector for the first time last year, and consumption overtook investment as the main contributor to overall GDP growth, demonstrating that the macrostructure of China’s economy is sailing in the right direction, Zhu said. The slower growth of China’s economy cannot be forcibly revved up as it minimizes risks while improving quality, he added. Zhu is confident of China’s economic growth, saying the sustainable growth of labor productivity is key to economic growth and long-term development. “At present, the biggest pressure on China’s economy comes from continuous internal rebalancing and structural adjustment, including labor market reform, industrial structure adjustment and more investment in education and innovation, the goal of which is to boost labor productivity,” he said. In addition, Zhu believes that as the world’s second biggest economy and one of the most open countries, China should try to raise the international status of its currency. The RMB’s ability to go global, becoming a transaction currency and a settlement currency of trade, is significant to the stable development of China’s finance and economy, he said. “Whether the RMB can be included in the Special Drawing Rights (SDR) basket is an important implication concerning the status of the RMB in the global community, which will promote the wide use of the RMB in international trade,” Zhu said. The IMF has conducted a preliminary assessment of the feasibility of having the RMB as a reserve currency, in preparation for a review of the SDR basket composition at the end of this year, which takes place once every five years. “If the RMB makes it into the SDR basket, it will become a global currency in the real sense, marking the first time the IMF accepts the currency of an emerging economy into its currency reserves,” Zhu said. The move, he added, would greatly increase the status of the RMB in the international arena, allowing the voices of emerging markets to draw more attention and promoting the reform of the IMF into a more inclusive organization. Zhu believes the internationalization of the RMB has developed rapidly in the past decade. The RMB’s circulation abroad has undergone great changes, with many countries willing to accept the RMB as part of their foreign reserves. “Further down the road, the SDR will have a great influence on RMB’s internationalization,” Zhu said.
