China is at "a crucial juncture" in its development path and needs to show more urgency in reforming its economy, the International Monetary Fund (IMF) said on Thursday.
During a two-week stay in Beijing, Shanghai and Inner Mongolia, a mission from the IMF met with senior officials from the government, the People's Bank of China, as well as the private sector for discussions on the economy.
In its preliminary findings, the IMF praised Beijing for its commitment to key structural reforms, including boosting consumption and environmental protection, but warned of "uneven progress" and called for more urgency in the implementation of corrective measures.
"We see significant advances on switching from industry to services, but less on tackling credit growth; and there has been substantial liberalization of financial markets but less improvement in governance and hardening SOE budget constraints. As a result, vulnerabilities are still rising and the buffers to deal with shocks are eroding," said David Lipton, the IMF's first deputy managing director.
While recent policy support has diminished risks in the near-term, the medium-term outlook appears more uncertain amid rapidly rising credit, structural excess capacity, and the opaque financial sector, he said.
A comprehensive plan is needed to address these risks, so Beijing should consider creating a group with a clear mandate to promote and implement restructurings of state-owned enterprises (SOEs) and address the associated banking consequences, he continued.