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IMF gave more bearish assessment of the risks surrounding China – Rabobank

FXStreet (Delhi) – Jane Foley, Research Analyst at Rabobank, notes that the comments from IMF Chief Lagarde yesterday that the news from China was “not all doom and gloom” and that growth in the country had “decelerated a bit” should be good news for the countries that count China as a key export partner.

Key Quotes

“The IMF, which downgraded its 2015 global growth forecasts earlier this week for the second time this year, chose not to alter its 6.8% Chinese growth forecast. The ‘glass half full’ tone of the IMF is out of kilter with the more bearish assessment of the risks surrounding China that we share with many other market participants.”

“These concerns centre on the rapid buildup of credit in recent years and on the risks associated with a disorderly unwinding of financial vulnerabilities. The bursting of the Chinese stock market bubble this summer and the devaluation of the CNY in August brought these risks sharply into focus.”

“This week’s releases of policy meeting minutes from the Fed, ECB and BoE have made clear that risks stemming from slowing growth in China and other parts of the EM universe have been worthy of plentiful discussions by global policy makers.”

“However, not all commentary from G10 central banks this week has been seen by the market as being dovish and the comments from the RBA that “in Australia, the available information suggests that moderate expansion in the economy continues”, was taken by the market as signalling less scope for further RBA rate cuts going forward.”

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