The International Monetary Fund has warned that China’s economic growth could be cut nearly in half this year if Europe’s debt crisis gets worse and pulls the world economy into a recession.
Already last month the IMF reduced its growth prediction for China from nine percent to 8.2 percent , but in its China Economic Outlook just published, the IMF’s most pessimistic forecast is for growth of only around four percent.
The European Union is a major trade partner with China — in 2010 it accounted for 17 percent of imports and exports; the US had 13.6 percent and Japan 10.5 percent.
The IMF said in “the unfortunate event such a downside scenario becomes reality”, China should respond with what it called “a significant fiscal package” of stimulus measures.
That could include tax cuts, subsidies for consumers and corporate incentives to expand investment.
China has made no secret of the fact that it is looking to reduce its dependency on exports.