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Agency predicts rebound for China of up to 9.2% growth in 2021 after 1.2% rise this year
With the International Monetary Fund predicting on Tuesday the worst global downturn since the 1930s, China has deployed an additional policy response to address the slowdown caused by the novel coronavirus pandemic and facilitate economic recovery through incentivizing bank lending and stabilizing corporate hiring.
A few hours after the IMF revised its projection on China's economic growth outlook－to 1.2 percent GDP growth this year, before a strong rebound up to 9.2 percent in 2021－the nation's central bank cut a key lending rate to a record low and injected large amounts of liquidity into the financial sector on Wednesday.
The IMF said the global economy is projected to contract by 3 percent this year, and the COVID-19 pandemic would send global growth into its deepest recession since the Great Depression in the 1930s.
"The Great Lockdown", as the IMF called the economic downturn, could weaken global demand and depress exports, adding risks to otherwise recovering Chinese business activities. It will require stronger monetary and fiscal action to minimize persistent problems that could emerge from subdued investment and job losses in this severe downturn, economists said.
Blunting the impact of the severe shock will require a surge of government debt, which is the key funding source of fiscal stimulus, and an optimized debt management system should be put in place to prevent potential financial risks during the recovery phase, said Li Yang, director of the Chinese Academy of Social Sciences' National Institution for Finance and Development.