Doomsday scenarios of a hard-landing in China may have transfixed market watchers, but the International Monetary Fund (IMF) remains relatively sanguine on the economic outlook.
A nearly 40 percent selloff in mainland stock markets over the past few months exacerbated concerns over the mainland economy, especially after China's regulators took a series of dramatic measures to boost the stock market, including large-scale share purchases, that had the unintended effect of denting confidence in the government and spurring criticism that the incident was badly mishandled. A devaluation of the yuan against the U.S. dollar also fanned speculation that China was trying to goose its exports sector again as the economy slows.
The IMF takes a different view.
"The Chinese economy is undergoing a major transition from export-led growth to a model increasingly driven by consumption and services," the IMF said in a blog post Monday. "So far, developments in the real economy provide some comfort that the transition can be managed."
"China has adequate policy space should further policy stimulus become necessary to prevent growth from falling excessively," the IMF said, although it urged that any measures target demand and rebalancing, such as supporting consumption for the "more vulnerable" members of mainland society.
While the transition is "essential," it's also caused a slowdown in imports and increased financial market volatility, the fund noted.