The IMF is working with
the Chinese government to improve access to financial services,
as a means of boosting domestic consumption, Anoop Singh, the
Fund director for Asia and the Pacific, said yesterday.
"Its important to
build another engine of growth," Singh said. "In China it means
The IMF indicated
yesterday in its World Economic Outlook that domestic demand is
contributing more to growth in China.
"On average over 2010-11,
private domestic demand is poised to contribute two-thirds of
near-term growth, and government activity about one-third,
whereas the contribution from net exports will be close to
zero," the report said.
Singh said one means of
achieving this is to improve access to finance for households
and small and medium-sized businesses.
development would help increase investment options for
households and raise the returns on savings, boosting household
income and helping with consumption," he added.
The initiative is under
discussion at a time when boosting domestic demand, and
reducing the economys reliance on exports, is seen as a
vital precondition for sustainable growth in China, and
ultimately for resolving persistent global financial imbalances
that some say contributed to the 2008 crisis.
The household savings
rate in China is currently at about 30% of disposable income.
Corporate savings rates have also doubled in past decades,
helping China hit a gross aggregate savings rate of more than
50% of GDP.
Singh said uncertainty
about access to financing prompts companies to save
considerable sums to finance future investment, but "a more
developed financial system would reduce that tendency."
The cooperation between
the IMF and Chinese government comes as part of the Financial
Sector Assessment Program. Put in place after the 1997
financial crisis, the FASP is a means for the IMF to monitor
developments in global financial markets.
The level of borrowing in
China is remarkably low. China has an estimated ratio of 0.12
bank loans per adult, compared to a ratio of 0.82 bank loans
for each adult in developed banking markets.
The low levels of
borrowing are caused in part by the difficulty for rural
Chinese in accessing credit or even finding a bank to deposit
cash. Many state banks withdrew from rural China in the late
1990s as they chose to pursue expansion in more profitable
According to statistics
released by the Chinas Banking Regulatory Commission,
2,945 townships had no bank. More than 700 million people
reside in rural China. In 2008, just 60% of 120 million rural
households facing financial problems in 2008 could borrow,
according to research by Tsinghua University.