In its latest report The International Monetary Fund warned Thursday that Asian economies were at risk of overheating as strong capital inflows fan inflationary pressures and raise the risk of damaging bubbles.
For China, like in other economies in the region, the risk is to ensure that the boom we see in asset flows does not, like in the past, lead to a cycle of boom and bust, said Anoop Singh, director of the IMF’s Asia-Pacific department.
The IMF report suggests that China should let its currency strengthen as part of measures to reduce the region’s dependence on exports.
A key step is to move away from investment and exports and toward consumption.
I do believe this is recognized quite widely in China, Anoop Singh told reporters.
