IMF cuts growth forecast for China as trade war heats up

The International Monetary Fund has revised down its economic forecasts for China, citing the growing trade war between Washington and Beijing, as it called on both countries to end the dispute.

The IMF now expects China’s economic growth to be 6.2% in 2019, just two months after it raised its forecast for the current year to 6.3%. It also cut its prediction for 2020, from 6.1% to 6%.

First deputy managing director David Lipton said: “After the slowdown in 2018, Chinese economic growth stabilised in earlier 2019, reflecting a wide range of policy support.

"Renewed trade tensions, however, represent a significant source of uncertainty which is weighing on sentiment. Growth is expected to moderate…as the planned policy stimulus partially offsets the negative impact from the recent US tariff hike on $200bn of Chinese exports."

President Donald Trump has accused China of having unfair advantages in global trade, and introduced tariffs on a wide range of Chinese imports. In return, Beijing imposed its own tariffs on US goods.

The two sides held talks earlier this year but failed to reach an agreement and in May, Washington raised tariffs on $200bn of Chinese goods from 10% to 25%. Beijing responded by announcing a new 25% import duty on $60bn of US products.

Lipton said: "The global economy would benefit from a more open, stable and transparent rules-based international trade system. China and its trading partners should work constructively to address shortcomings in the trading systems and enable a system that can more readily adapt to economic changes to the international environment.

"China can also play an important role and benefit from further opening up and other structural reforms that enhance competition. Trade tensions between the US and China should be quickly resolved through a comprehensive agreement that supports the international system and avoids managed trade."

Lipton, along with Kenneth Kang, IMF deputy director of the Asia and Pacific department, visited China between 23 May and 5 June. They held talks with Chinese officials including Yi Gang, governor of the People’s Bank of China, and finance minister Liu Kun.