Interview: Less but better growth for China: IMF chief economist

WASHINGTON, Oct. 9 -- China's economic growth slows but stays healthy, said Olivier Blanchard, chief economist of the International Monetary Fund (IMF).

China is expected to grow between 7 percent and 8 percent at current stage. But as it shifts to domestic consumption and services for growth, it could sustain 6 percent growth rate in the longer term, Blanchard told Xinhua as the IMF-World Bank annual meeting is slated to open on Friday.

"Less growth, but better growth for China," Blanchard said.

"It's like a marathon. If you run at 10 percent a year, that may be possible, but you will have problems of pollution, urban tensions and all kinds of other issues," Blanchard said. "Even 6 percent is a good number, much better than many other countries," he added.

China's economy showed deeper signs of slowdown this summer, as a set of economic indicators slipped below their normal level, reigniting the fears of a hard landing of the world's second largest economy.

In its latest World Economic Outlook, the Washington-based lender expected China's economy to grow 7.4 percent this year, and 7.1 percent next year, unchanged from its last forecast in July.

Blanchard said the IMF did not revise the growth forecast for China because it sees the risks of the property sector and shadow banking coming under control.

"The housing prices will come down. We do not think it will become a big financial or fiscal issue. It becomes catastrophic when the decrease of the housing price leads to the bankruptcies of banks, households and the state. That's not the case we currently see in China," he said, citing the relatively low household leverage rate and mortgage rate in China.

He noted that the shadow banking sector poses some problems, but the banks behind the shadow banking system have enough resources if needed. "If there were problems with the banks, the government itself is in a strong position to help," he said.

Despite the downward risks, he underscored that China still has a long way to go in restructuring its economy from too much dependence on investment to consumption led growth, given that investment is still on the rise in China to make up for the loss of momentum of exports.