World economy too reliant on China and US, says IMF
Mark Milner
Monday March 7, 2005
The Guardian
The International Monetary Fund is worried that global growth is becoming too reliant on the performance of the US and Chinese economies, according to a report yesterday.
While the Chinese government is seeking to slam the brakes on the country's soaring infrastructure spending, the treasury secretary, John Snow, described the US economy as resilient and dynamic. According to today's edition of the German newspaper Handelsblatt, the IMF's forthcoming World Economic Outlook report will warn of increasing risks to global growth if the US and China slow down at the same time.
"Global growth is to an inappropriate degree linked to the United States and China," the IMF report will say when it is published next month.
"The eurozone and Japan, which together have about one-fourth of the world's gross domestic product, have once again disappointed. Thus the risks are increased that there could later be a sharp downturn especially if the United States and China are hit with economic slowing."
On Saturday the Chinese premier Wen Jiabao said that the government was seeking to restrict the growth in spending on fixed assets to 16% - down from 25% in 2004. Workers have been told to expect smaller pay increases.
As China seeks to put the brakes on its economic expansion Mr Snow was bullish in his assessment of the strength of the American economy despite the renewed strength of the oil price over the last month.
Although he acknowledged that energy prices were "way too high" Mr Snow said they were not in a danger zone as far as the US economy was concerned.
"The American economy is so strong, so robust right now that we have blown right through these very high energy prices.
"The American economy is very resilient, its very adaptive, its very dynamic, but clearly these energy prices create headwinds."
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