China poses threat to global growth, IMF warns

China’s slowdown appears to have bigger repercussions for other countries than had been expected, the IMF said.

The troubles in China have sent the prices of commodities such as oil and copper sliding, and, according to The BBC, the falls have hit exporters of commodities, such as Brazil and Russia, particularly hard.

The IMF’s warning comes ahead of a meeting of G20 finance ministers and central bankers in Ankara on Friday and Saturday.

The IMF said that the problems could lead to “much weaker outlook” for global growth.

However, the fund still expects the global economy to expand by 3.3 per cent this year, slightly lower than 3.4 per cent in 2014.

The US is forecast to grow by 2.5 per cent, up from 2.4 per cent in 2014, the eurozone should expand by 1.5 per cent, nearly double the 0.8 per cent seen last year, while China should expand by 6.8 per cent, down from 7.4 per cent.

The IMF called on China to keep reforming its economy despite the recent falls in the stock markets on the mainland.

Chinese stock markets have been falling since mid-June and the government unexpectedly devalued the yuan on 11 August.

Many believed the move was an attempt to make Chinese exports more competitive.

However, US Treasury Secretary Jacob Lew warned China against manipulating its currency to give its exporters an unfair advantage. “We are going to hold them accountable,” he told CNBC.

The IMF is also concerned about the impact on global growth if the US Federal Reserve raises rates later this year.

The Fed, which could decide to lift rates when it meets on 16 and 17 September, should keep its decisions “data-dependent”, the Fund said.

Analysts at Societe Generale said: “The IMF clearly doesn’t think raising rates against the modest global growth backdrop is a good idea.”

More broadly the IMF recommended that advanced nations should maintain very loose monetary policies and “growth-friendly” fiscal policies.

That meant the European Central Bank should extend its asset-buying programme unless inflation rises sufficiently, the note said.