China will strengthen stimulus if economic slowdown continues amid virus spread, Changyong Rhee, senior official at International Monetary Fund said. But China should not disregard structural reforms to cater rapid credit growth, he added.
Rhee, director of the IMF’s Asia and Pacific Department, said that China’s economic growth was slowing down before the epidemic due to the government’s measures to deleverage the economy.
To support the economy, Beijing is likely to rely on stimulus, even if the growth will be smaller than previous fiscal measures that prioritized large infrastructure spending.
Policymakers implemented steps to underpin the economy while investors worried about the epidemic. The virus death toll stood at 1,113 by the end of Tuesday.
The World Health Organization said that the virus posed a global threat worse than terrorism.
Rhee said that the virus has already added risks to the growth outlook of the region even if it was too early to estimate its impact.
Rhee added that it was undeniable that the virus will affect China and countries close to it, more so on Asian tourism.
Seventy percent (70%) of tourists in Hong Kong are from mainland China, while in Japan and South Korea, it makes up for 30%.
Rhee did not reveal figures to the potential impact of factory shutdowns in China to Asian economies and companies. He said that it will all depend on how fast the epidemic will be contained.