China's rut 'not yet a crisis' - IMF
China's economic slowdown and a sharp fall in its stock market is not a crisis but a "necessary" adjustment for the world's second-biggest economy, a senior International Monetary Fund (IMF) official said over the weekend.
Fresh evidence of easing growth in China hammered global stock markets last week, driving Wall Street to its steepest one-day drop in nearly four years. The ISEQ overall index fell 5pc in the week while other markets across Europe lurched into contraction mode. More than €2.5trn was wiped off the value of global stocks.
"Monetary policies have been very expansive in recent years and an adjustment is necessary," said Carlo Cottarelli, an IMF executive director representing countries such as Italy and Greece on its board.
"It's totally premature to speak of a crisis in China," he said.
The IMF official reiterated an IMF forecast for a 6.8pc expansion in the Chinese economy this year, below the 7.4pc growth achieved in 2014.
"China's real economy is slowing but it's perfectly natural that this should happen ... What happened in recent days is a shock on financial markets which is natural," he added.
Following a slew of poor economic data, Beijing devalued the yuan in a surprise move earlier this month. Investors are concerned other emerging markets, who supply the lion's share of global economic growth, could take the same course.
"There's a great deal of nervousness around the weakness in China, and that's overshadowing the fact that the US economy is sound and the European Union economy is firming," said RidgeWorth Investments portfolio manager Alan Gayle.
Cottarelli said the IMF would discuss with Chinese authorities in coming months their decision to weaken the currency.
Turning to Greece, which is heading for an early election in September, Cottarelli said the IMF would decide in two or three months whether to join the latest international rescue efforts. The IMF deems Greece's debt unsustainable and has called for debt relief as a condition to participate in a third bailout.
"The debt sustainability assessment will take place after the launch of the programme (agreed with creditors) in two or three months. The IMF will then be able to evaluate whether to intervene," he said.
80pc - Of global growth supplied by emerging markets
€6.4bn - Wiped from value of ISEQ Overall Index last week
17pc - Of world GDP comes from China